Period  2Q13 / 1H13

Actual vs. Expectations  Perisai Petroleum Teknologi (“PERISAI”) reported 2Q13 core net profit of RM24.1m which brought its 1H13 net profit to RM47.7m which was within expectations, accounting for 47.6% and 47.5% of our (RM100.4m) and the consensus (RM100.5m) full year estimates.

 We have restated PERISAI’s earnings to exclude the discontinued items. Its derrick-lay barge E3 has been presented as discontinued operations in accordance with the eventual sale in 2-3 years time.

Dividends  No dividend was declared in this quarter as expected.

Key Results Highlights  QoQ, the 2Q13 net profit only saw a minimal sequential difference from 1Q13 (RM23.7m) on similar level of operations.

 YoY, the net profit grew by 8.8% to RM23.7m (from RM23.3m) mainly due to better operating income.

Outlook  PERISAI’s derrick-lay barge E3’s charter contract with TLO Offshore has officially ended and the company is currently looking for contracts. Its MOPU is also up for renewal by Sept-2013. Whilst the E3 will pose minimal impact to bottom-line, that cannot be said for the MOPU which contributed to around 50% of current earnings. We await management’s guidance on the outcome for both vessels.

 The long-awaited asset swap (a stake in E3 for a stake in Ezra’s FPSO) was completed yesterday. This means that PERISAI will start recording the E3 derrick-lay barge as a JV and kick-start contributions from the FPSO EMAS from Sep-13 onwards.

 PERISAI is set to receive two jack-up rigs (in mid-14 and mid-15) which we believe should be able to secure contracts given that there are at least 17 rig contracts that are expiring over mid-CY13-15.

Change to Forecasts  We are revising our earnings (to account for one-quarter of FPSO earnings) and higher share base (from 938.9m to 1081.6m to reflect the asset swap completion.

 Our fine-tuning results in FY13E-FY14E earnings increasing by 5.3% and 16.5% respectively. However, with the increase in share base, FY13E-FY14E EPS only increased marginally by 0.1% and 0.7% respectively.

Rating  Maintain OUTPERFORM

Valuation  Our TP is raised to RM1.78 (from RM1.76) based on CY14 PER of 14x.

 Our CY14 PER is based on a 10% discount to the 0.5 SD level of 15.6x of PERISAI’s historical trading range mainly as there are still some uncertainties in relation to its two assets, the E3 and MOPU.

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.

Source: Kenanga