Period  3Q13/9M13

Actual vs. Expectations  Perdana Petroleum (PERDANA) reported 3Q13 net profit of RM15.5m which brought 9M13 net profit to RM39.8m.

 We deem the results to be within expectations, accounting for 72.2% and 73.4% of our and consensus full year estimates of RM55.1m and RM54.2m, respectively.

Dividends  No dividends were declared as expected.

Key Results Highlights  QoQ, net profit was up 17.8% mainly due to: (i) better PBT margins as a result of costs savings from the disposal of its older units, and (ii) a tax credit in the quarter which stemmed from the overprovision of tax expense previously.

 YoY, PERDANA saw a slim improvement of 1.9% in 3Q13 net profit, also mainly due to the tax credit recognised in the quarter. This mitigated the impact of the lower revenue (-8.6%) which was caused by lower utilisation of vessels as PERDANA is awaiting the mobilisation of new deliveries and the upgrading of vessels to meet the requirements for a long-term contract from Dayang Enterprise (DAYANG, OP; TP:RM6.06) and the scheduled dry-docking for a vessel in the current quarter.

Outlook  Medium-to-long-term prospects are stable on the back of PERDANA’s long-term contracts. For its existing vessels, at least ten are chartered till 2018-2019 and another three until 2014-2015. Only four vessels (one accommodation barge and three AHTSs) are on spot charters which PERDANA is confident of 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 which we believe management will broach after it mobilises all vessels needed for the DAYANG project by next year.

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

Rating   Maintain OUTPERFORM

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

 Our target PER is in line with PERDANA’s 2-year historical average forward PER of 14.0x seen in the 2007-2008 peak cycle.

Risks to Our Call  (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