Period 3Q14/9M14
Actual vs. Expectations Perisai Petroleum Teknologi (PERISAI) reported 3Q14 net profit of RM2.2m, bringing its 9M14 net profit to RM0.2m.
The results were below our forecast and consensus expectations; barely reaching 1% of both estimates of RM33m and RM33.6m, respectively; namely due to: (i) higher-than-expected finance costs and (ii) lower-than-expected earnings from its jack-up rig due to start-up costs.
Dividends No dividends were declared as expected.
Key Results Highlights QoQ, 3Q14 recorded net profit of RM2.2 largely due to contributions from its 1st jack-up rig that contributed c.2 months of earnings within 3Q14. Earnings were somewhat tanked by additional interest charges on PERISAI’s new MTN loan, which resulted in finance costs ballooning in 3Q14 (+>100%).
YoY and YTD, the 3Q14 and 9M14 net profit dropped by 90.5% and 99.7%, respectively, given the lack of earnings from MOPU Rubicone and E3.
Outlook PERISAI guided that E3’S chance of contract wins is unlikely until end-1Q15 whilst Rubicone MOPU might see better opportunity only in 2H15.
Given that PERISAI has won a contract for its 1st jack-up rig recently, the next win will only be in FY15 when the 2nd rig is delivered by mid-2015.
Change to Forecasts We have cut out FY14E earnings by 65.3% to reflect the higher interest costs, higher losses from the idle assets and lower jack-up rig profit margins from its 1st jack-up rig.
For FY15E, we cut out net profit forecast by 33.7% as we: (i) reduce our MOPU utilisation to 50% (from full-year contribution) and (ii) reduce margins for jack-up rig to be more conservative.
Rating Downgrade to MARKET PERFORM from OUTPERFORM
Valuation We are cutting out FY15E target PER to 13x (from 15x previously) based on -0.5x std deviation based on historical 5-year forward PER for the sector; as we believe under the current sluggish oil and gas sentiment, small-mid caps stocks should trade below 15x.
Moreover, the stock holds significant earnings risk, which caps prospect in the near-term.
Our PER and forecast trims lead to our TP falling to RM1.08 from RM1.88 previously.
Risks to Our Call (i) Better margins on assets and (ii) Faster-thanexpected job wins for assets.
Source: Kenanga
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