News

Yesterday, it was announced that PERDANA has received DAYANG’s notice of MGO after completing the acquisition of 5.74% interest in PERDANA from Affin Hwang Asset Management.

Post both exercises; DAYANG’s stake in PERDANA is increased from 32.7% to 38.5%.

With the Share Sale Agreement (SSA) turning unconditional, the MGO for PERDANA’s remaining shares is triggered at RM1.55/share in which the 1st closing date would be on 13 August 2015.

Comments

Earlier, we have already anticipated for the GO to be triggered as DAYANG would not have offered to acquire the 5.75% stake from Affin Hwang Asset Management if it is not confident in taking over control in PERDANA.

We believe DAYANG is in a good dealing position with the industry in a down-cycle, thereby reducing the need for it to pay premium pricing for acquisition of its associate.

If significant control is not achieved on the 1st closing date of the offer, DAYANG, in our opinion, would not seek to revise the offer price given PERDANA’s near term earnings headwinds due to overall slowdown in the AHTS market.

We believe it will be positive for DAYANG to gain control in PERDANA given that it provides access to its fleet of competitive vessels, which will be needed by the group to be in the stronger position to bid for larger HUC contracts in the next round of Umbrella Pan Malaysia contract award, due probably in 2018/2019.

Outlook

Order book currently stands at RM3.9b, expected to span until 2018.

Timing risk is inherent for its HUC projects, which account for a significant portion of the group’s revenue contribution as its oil majors clients seek to defer contracts partially to later years in lieu of uncertainty in crude oil prices.

While its existing HUC work orders with Shell and Petronas Carigali are expected to slow down, activities are expected to be strong with its recently secured RM250m Facilities Improvement Project (FIP) contract and RM280m Bardegg-Baronia EPCC contract to partially offset the short fall.

Forecast

We maintain our forecasts for now.

Rating

Maintain MARKET PERFORM

Valuation

TP is maintained at RM2.50 which is pegged to CY16 12x PER.

Risks to Our Call

(i) Slower than expected work orders for HUC contract, and (iii) lower-than-expected margins.

Source: Kenanga Research - 3 Jul 2015