News  Perdana Petroleum (“PERDANA”) bonus issuance went ex yesterday.

 The current number of shares is now 727.2m (from 519.2m previously).

 Recall, in August, PERDANA announced a 2-for-5-bonus issuance, which would result in up to 222.6m additional shares being issued.

Comments  The new shares inflates PERDANA’s share base by 40%.

 Overall, we are positive on the bonus issuance; as it will enhance trading liquidity of the stock.

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 three are till 2014-2015. Only four vessels (one accommodation barge and three AHTS) are on spot charters which PERDANA is confident of securing recurring contracts.

 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.

Forecast  The bonus issuance has no impact to our forecasts; but will dilute FY13-14 EPS by 31.9%.

Rating Maintain OUTPERFORM

Valuation  The enlarged share base reduces our target price to RM1.70 (versus RM2.50) based on an unchanged target PER of 14.0x (in line with its 2-year historical average forward PER of 14.0x seen in 2007-2008) on its CY14 EPS of 14.6sen.

 As there is still a 19% upside we are keeping our target OUTPERFORM call on the stock.

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