Period       1Q13 / 3M13

Actual vs. Expectations     The 1Q13 net profit of RM23.7m was within expectations, accounting for 23.6% and 24.0% of ours and the consensus FY13 full year estimates of RM100.4m and RM98.9m respectively.

Perisai has presented 50% of its E3’s earnings as discontinued operations in accordance with its eventual sale once the new FPSO earnings (JV with Ezra) start to contribute. However, we have opted to consolidate the figures until the asset swap actually materialises.

Dividends     No dividend was declared in this quarter as expected.

Key Results Highlights     QoQ, the 1Q13 net profit (RM23.7m) only saw a minimal sequential difference from 4Q12 (RM24.1m) as the operations were pretty similar. This was despite the PBT improving by 68.1% as the 4QFY12 PBT earnings were dragged down by c.RM24.9m in impairments for its cold-stacked workboats.

YoY, the net profit only grew 1.6% to RM23.7m (from RM23.3m) as there was no really change in the business activity.

Outlook     The asset swap (a stake in E3 for a stake in Ezra’s FPSO) expected in mid-2013 above will expand Perisai’s service offering to the production leg of the oil and gas value chain and boast its long-term earnings.

Its first jack-up rig (expected by July-2014) will be the first kicker to earnings with further growth by mid-2015 for Perisai due to the incoming second rig.

Change to Forecasts     No changes to our forecasts at this juncture as the earnings were within expectations.

Rating     Maintain OUTPERFORM

Valuation     Given that we are approaching mid-year, we have rolled forward our valuation basis to CY14.

We believe the overall sector is entering an oil and gas up-cycle (similar to 2007-2008) where small to mid-cap stocks are likely to see aggressive PER expansions (around 4.0x from the start of the cycle).

Perisai has only risen around 1.3x in its PER multiple for the YTD.

We believe investors may really start to credit the stock after: 1) it completes its upcoming asset-swap exercise (expected in mid-2013, which could see its share base swelling by around c.15.4% to 1,081m shares (from the current 937.5m shares); and 2) more visibility on its jack-up rig (a subsector that is likely to gain traction in 2H2013) and FPSO earnings contributions.

We are hence increasing our CY14 targeted PER by only 1.0x PER to 14x (from 13x previously) for now. This correspondingly lifted our target price for the stock to RM1.76 (from RM1.27).

Risks     1) Delays in the asset-swap which could lead to slower re-rating of the stock; and 2) the failure to achieve the expected margins on its projects.

Source: Kenanga