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.

While PERDANA’s long-term intrinsic value might be higher, under current weak market scenario, we believe DAYANG stand a good chance of getting 50%+1 share of the company post GO.

We believe it is a positive deal for PERDANA in the long run as it will have higher certainty of job contracts for its vessels (namely accommodation work barges and work boats) to be awarded by DAYANG in the future.

Aside from that, PERDANA’s operations will mainly remain status quo with no significant changes in key operational personnel expected.

Outlook

Marathon, its 12,240bhp AHTS vessel will go for 1-month dry docking in July before commencing its 2-year contract with Murphy oil after that. Tender book is at RM400m with another RM1.0b to be submitted next quarter.

Out of its fleet of 17 vessels, only 4 vessels (Frontier, Ranger, Horizon and Liberty) are exposed to the spot charter market while the remaining vessels are on long-term charters spanning to 2018/2019.

PERDANA’s 4 AHTS vessels chartered to Petronas under long-term basis may not see significant discount in charter rates despite renegotiation with PETRONAS due to its already competitive existing charter rate in comparison to the market.

No further vessel additions are expected in FY15. The group will be saving resources for incoming deliveries of two higherend 500-pax work barges, scheduled to take place in 1Q16 and 2Q16, respectively. We do not discount the possibility of vessel delivery delays due to weak OSV market.

Forecast

We maintain our forecasts.

Rating

ACCEPT OFFER

Valuation

Our Target Price is maintained at RM1.55 pegged to DAYANG’s MGO offer price.

Risks to Our Call

(i) Weaker than expected margins and (ii) Slower than expected recovery in OSV market

Source: Kenanga Research - 3 Jul 2015