Period 4Q13/FY13

Actual vs. Expectations Excluding a net gain on discontinued items of RM9.4m, Perisai Petroleum Teknologi (PERISAI)’s reported a 4Q13 core net loss of RM9.1m which brought the FY13 net profit to RM62.0m. This is below expectations, accounting for 81.9% and 77.4% of our forecast (RM75.8m) and the consensus (RM80.2m), respectively.

 We have restated PERISAI’s earnings to include its discontinued items (instead of being a line-item). Its derrick-lay barge E3 has been presented as discontinued operations in accordance with the eventual sale in 2-3 years’ time.

 Variance to both our and consensus estimates are the higher-than-expected expenses for the MOPU and E3 and lower-than-expected FPSO earnings as the operational start of the vessel was delayed.

Dividends  No dividends were declared in the quarter as expected

Key Results Highlights QoQ, the 4Q13 core net profit declined by >100% to RM0.6m due mainly to a lack of revenue from the two idle assets (MOPU Rubicone and E3).

 YoY, the 4Q13 core net profit was down by >100% to RM0.6m from RM24.1m due to the abovementioned factors.

Outlook  The E3 and MOPU Rubicone are still idle to-date and PERISAI is currently still bidding for both domestic and international projects. Guidance is for contract wins earliest in the next 3-6 months for both local and overseas bids.

 PERISAI is also bidding for jack-up rig contracts ahead of its 1st jack-up rig delivery in May-14. Preference is to keep the rig in local-shores. Given the buoyant jack-up rig demand, we foresee no issues for a contract win given that there are at least 17 rig contracts that are expiring from mid-2013 to 2015.

Change to Forecasts We have turned cautious on E3 and MOPU Rubicone’s prospects as both are currently still idle and might remain so for the next 3-months. As such, we reduce our FY14 forecasts to account for only seven months of work (from 9 months previously) for both the vessels. This leads to a 10.6% reduction to our FY14E net profit.

 We maintain our FY15 net profit estimate of RM171.0m; which features: (i) full-year utilisation for E3, MOPU, FPSO and 1st jack-up rig and (ii) half-year contribution from the 2nd jack-up rig.

Rating Maintain OUTPERFORM

Valuation  We maintain our TP of RM2.53 based on 16x CY15 EPS. Post the upcoming private placement, our TP is likely to be diluted by c.8% to RM2.32, which is still a healthy upside from hereon.

 The 16x PER is approximately at a 19%-discount to its 5-year +1.5 standard deviation (above its Forward PER mean) of 19.5x which we believe is justifiable given the uncertainties with regards to job wins for its MOPU division.

Risks to Our Call (i) Lower margins on assets; and (ii) Slower-thanexpected job wins for assets.

Source: Kenanga