News  Yesterday, Perisai Petroleum (“PERISAI”) announced that the contract for its Mobile Offshore Production Unit (MOPU), the Rubicone, has expired and not renewed. The Rubicone had been on a bareboat charter to Gryphon Energy (M) Sdn Bhd from 30 September 2011.

 PERISAI guided that in preparation for the expiration of the charter, the planning for the demobilisation of the Rubicone has commenced.

Comments  Whilst there have been fears that the MOPU contract would not be extended, we are nonetheless surprised as we had previously believed that PERISAI would have been able to secure a replacement contract.

 In our recent visit we also gathered that the E3, PERISAI’s derrick pipelay barge; which had been on bareboat charter to SapuraKencana Petroleum (“SKPETRO”; OP; TP: RM4.72); is currently idle while awaiting results whether it is successful in securing a portion of the Pan Malaysia Transport and Installation project that is due to be awarded in early-CY14.

 We are negative on the double whammy, as the MOPU and E3 accounts for around c.46.6% of our current CY14 PBT forecasts.

 Management guides that it could take around 6 months for the MOPU to secure a new contract, and that they are currently reviewing new opportunities.

Outlook  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 from mid-CY13 to CY15.

 The long-awaited asset swap (a stake in E3 for a stake in Ezra’s FPSO) was completed in Aug 13. This means that PERISAI will start to recognise the E3 derrick-lay barge as a JV and kick-start contributions from the FPSO EMAS from Sep-13 onwards. This will minimise the impact of the E3 being left idle.

 As management has guided that it could take around 6 months for the MOPU to secure a new contract, the shortterm outlook is seen as subdued.

Forecast  We are revising our CY13-14 forecasts to account for: (i) 9-month of E3 contribution in CY13-14 (vs. 12-month contribution previously); and (ii) 9-month MOPU contribution in CY13-14 (vs. 12-month contribution previously)

 The revisions result in CY13E-CY14E earnings decreasing by 28.3% and 19.9%, respectively.

Rating   Downgrade to Market Perform

Valuation  Our new TP falls to RM1.42 (from RM1.78) based on an unchanged CY14 PER of 14x. Given the minimal upside of 6.2% to current share price we are downgrading our call to Neutral.

 Our CY14 PER is based on a 10% discount to the 0.5 SD level of 15.6x of PERISAI’s historical trading range. The discount is due to contract uncertainties related to the E3 and MOPU.

Risks to our call Contracts for E3 and MOPU Rubicone coming in faster than anticipated

Source: Kenanga