Period  1Q14

Actual vs. Expectations Perisai Petroleum Teknologi (PERISAI) reported a 1Q14 net loss of RM3m. While the result is a far cry from both our and consensus FY14 expectations of RM67.7m and RM79.9m, respectively; it was, nonetheless, expected given the absence of contributions from the MOPU Rubicone and E3, year-to-date.

 Earnings catch-up is expected only in 2H as its 1st jack-up rig has already secured a contract.

 On the back of such results, we expect the consensus to downgrade FY14 estimates. Currently, our FY14 estimate is c.15% below the consensus.

Dividends  No dividends were declared as expected.

Key Results Highlights QoQ, the 1Q14 net loss is an improvement from a net loss of RM9.1m in 4Q13 as there had been a full-quarter of FPSO earnings, and slight tax credit stemming from a tax over-provision. In

4Q13, we estimated only 1 ½- 2 months’ worth of FPSO contribution.

 YoY, the 1Q14 net loss was unsurprising, down by c.100% to from RM23.7m due to lack of earnings from the MOPU Rubicone and the derrick pipe-lay barge E3.

Outlook  PERISAI guided it is still bidding for domestic and international projects for both the E3 and its MOPU and is hopeful to win contracts over the next 3-6 months.

 Given that PERISAI has won a contract for its 1^st jack-up rig recently, the next win will only be in FY15 when the 2nd rig will be delivered by mid-2015. Again, 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 maintain our FY14 net profit forecast as we deem the 1Q14 results to be within expectations. We await signs of better times in 2H14.

Rating Maintain OUTPERFORM.

Valuation  Our target price of RM2.22 based on an unchanged 16x CY15 EPS.

 The 16x PER ascribed 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 justified given the uncertainties with regards to job bids in its MOPU division.

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

Source: Kenanga