Period  4Q13/FY13

Actual vs. Expectations Perdana Petroleum’s (PERDANA) reported 4Q13 net profit of RM21.3m brought FY13 net profit to RM61.1m. This is above both our (RM55.1m) and consensus (RM52.4m) full-year expectations at 110.9% and 117%, respectively.

 Higher-than-expected margins on the back of cost savings from the divestment of its older vessels were the main factors for the variance to our forecast.

Dividends  No dividends were declared as expected.

Key Results Highlights QoQ, net profit was up 37.4% mainly due to: (i) commencement of long-term contracts from Dayang Enterprise (DAYANG, OP; TP:RM3.10); and (ii) better PBT margins as a result of costs savings from the disposal of its older units.

 YoY, PERDANA locked in significant improvements (+ 81.3%) in 4Q13 net profit, again mainly due to the factors mentioned above.

 YTD, it is evident that PERDANA has now shed the troubles of the previous year. Utilisation had improved to 80% (from 77% in 2012).

Outlook  Medium-to-long-term prospects are stable on the back of PERDANA’s long-term contracts (15 OSVs).

 Currently, only three vessels (one accommodation barge and two 5k AHTSs) are on spot charters and PERDANA is confident of securing recurring contracts for such vessels given the OSV upcycle.

 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 have fine-tuned our FY14 net profit by +9.5% largely to account for a reduction in our effective tax rate to 5% (from 10%) as we were previously too aggressive.

 Given that investors are now looking forward to longerterm prospects for the oil and gas sector, we are introducing our FY15 net profit forecasts of RM115.9m which features an EPS growth of 15.9% on the back of:

(i) full-year contribution for two more work barges that will be received in 2014 and (ii) 90% utilisation for PERDANA’s spot charter vessels.

Rating Maintain OUTPERFORM

Valuation  Our new target price of RM2.47 (from RM1.95) is based on an unchanged target PER of 15.5x (in line with PERDANA’s +1.5 historical standard deviation forward level seen on top of its average mean in 2006-2008) on CY15 EPS of 15.3 sen.

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