Period     2Q13/1H13

Actual vs. Expectations   Perdana Petroleum (“PERDANA”) reported 2Q13 net profit of RM13.2m which brought 1H13 net profit to RM24.3m. Despite just making up 44% and 45.7% of our (RM55.1m) and consensus (RM53.8m) estimates, the performance is deemed within expectations as we expect a stronger 2H13 on the back of: (i) cost savings once the old vessels disposal has been completed by end-June; and (ii) mobilisation for vessels contracted on long-term charter to  Dayang Enterprise Bhd (“DAYANG”; OP; TP: RM6.06) kicks off in Jul to Aug-13. 

Dividends    No dividends were declared as expected.

Key Results Highlights   QoQ, the core net profit was up 18.7% mainly due to increased revenue (+26.2%) on account of better vessel utilisation and better charter rates. Similar to other vessel players, PERDANA was hit by lower vessel movement due to the monsoon season in 1Q.

YoY,  as expected, Perdana posted a complete turnaround in 2Q12 due to: (i) better utilisation and charter rates for its vessels due to the improvement in the OSV segment (most domestic-centric OSV players saw a weak 2012); and (ii) leaner cost structure due to cost rationalisation exercise executed in 2012 (i.e. sale of some 12k bhp vessels and write-downs in the book value of its old 7 vessels).

Outlook    Medium to long-term prospects are stable on the back of PERDANA’s long-term contracts. For its existing vessels, at least 10 are chartered till 2018-2019; and another 3 are until 2014-2015. Only 4 vessels (1 accommodation barge and 3 AHTSs) are on spot charters which PERDANA is confident on securing recurring contracts.

The mobilisation for the vessels requires DAYANG to kick-start with two vessels in Jul-13, two vessels  in Aug-13 and two more in 1H14.

Longer-term prospects will hinge on PERDANA’s future fleet expansion. 

Changes To Forecasts  We maintain our forecasts as results are in line. 

Rating  Maintain OUTPERFORM

Valuation     Target price of RM2.40 is based on an unchanged PER of 14.0x on CY14 EPS of 14.6sen.

Our target PER is in line with PERDANA’s 2-year historical average forward PER of 14.0x seen in the2007-2008 peak cycle.

Risks    (i) Lower than expected daily charter rates and utilisation rates; and (ii) sudden downturn in crude oil prices that could adversely impact the offshore oil and gas services industry.

Source: Kenanga