News    Last week, Perisai Petroleum (“PERISAI”) announced that its wholly-owned subsidiary, SJR Marine (L) Ltd received a notice from TL Offshore Sdn Bhd for the extension of the charter of the Derrick Lay Barge, Enterprise 3 (“E3”) to 15 August 2013 (from the initial June-13 termination) and thereafter on a daily charter basis (of USD60k a day) subject to a notice period of 21 days to precede the end of the charter.

TL Offshore is a subsidiary of Sapurakencana Petroleum (“SKPETRO”).

Comments    We are not surprised by the extension, given that SKPETRO’s new pipe laying assets (constructed in China) have not been delivered.

The daily charter rate is also similar to the current rate that the E3 is currently being commissioned, at USD61k per day.

Whilst E3’s contract with TL-Offshore may get terminated after August 2013, we believe that it will be able to secure contracts moving ahead, as there could be more new markets which it can access after the tie-up with Ezra. Recall, 49% of the E3 will be swapped for 51% of Ezra’ FPSO, the Perisai Kamelia. As such, we are not reducing the earnings forecast for the E3 for now.

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

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

Forecast   No changes to our forecasts as we expect E3 to continue securing new contracts under the jointownership with Ezra.

We are only looking to make revisions to our forecasts once the asset-swap becomes effective, expected by August 2013.

Rating   Maintain OUTPERFORM

Valuation    Maintain TP of RM1.76 based on CY14 PER of 14x. 

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

Our CY14 PER is based on a 10% discount  to the 0.5 Std Dev level of 15.6x of PERISAI’s historical trading range as the asset swap that transforms PERISAI to a more operational business model of its assets (versus the bare-boat business model it is currently adopts) is yet to be completed. 

Source: Kenanga