Period

2Q15/1H15

Actual vs. Expectations

1H15 net profit of RM8.6m came below expectations, which only made up 28.6%/29.4% of house/street’s FY15 full-year estimates.

The negative variance could be due to discounts on its Perisai Pacific 101 jack-up rig Daily Charter Rate (DCR) in the wake of the weak oil price trend.

Dividends

No dividends were declared as expected.

Key Results Highlights

PERISAI recorded higher 2Q15 core net profit of RM1.6m from RM1.0m in the corresponding quarter last year, reflecting: (i) earnings contribution from its newly build jackup rig, Perisai Pacific 101 which commenced operations in August 2014, and (ii) higher JV contribution from its FPSO unit, Perisai Kamelia.

However, on QoQ basis, 2Q15 core net profit plunged 77.2% primarily due to: (i) discount given on its jack-up rig DCR as a result of oil price drop and (ii) higher losses from its Rubicone MOPU due to higher costs incurred. Putting it in perspective, drilling segment posted a loss of RM0.9m in 2Q15 from profit of RM5.3m in 1Q15 as a result of the DCR discount.

1H15 core net profits turned into profit of RM8.6m from loss of RM2.0m underpinned by maiden contribution from its first jack-up rig in 1H15 and higher JV earnings driven by higher profits from FPSO unit Perisai Kamelia.

Outlook

PERISAI’s pipelay barge, E3 is still without a contract at the moment whilst Rubicone MOPU may see better opportunity only in 2H15. We believe it is unlikely for the group to secure any major contracts this year that can contribute significantly to FY15 earnings due to the still weak O&G industry outlook.

To-date, no contract has been secured for the second jackup (Perisai Pacific 102) which is originally scheduled for delivery before end of this year. The group has decided to delay the delivery of the asset until they can secure a firm drilling contract.

Its FPSO unit, Perisai Kamelia, will see its 3-year contract running until Nov 16 and the group is hopeful that it would secure another year of extension on the contract.

All in, earnings uncertainties remain in lieu of low visibility of contract awards for the group in the near-term while idle assets continue to burn cash and hitting the bottom-line.

Change to Forecasts

We have cut our FY15 forecast by 58.9% to RM12.4m as we imputed lower DCR of USD100,000/day (from USD144,000 previously) for Perisai Pacific 101 to account for the discount given.

FY16 forecast is reduced by 49.1% after we: (i) impute lower DCR assumption of USD100,000/day for Perisai Pacific 101, and (ii) factor in 0% utilisation assumption of Enterprise 3 (from 100% previously) in view of weak oil prices and the group’s intention of disposing it to EOC Ltd by exercising its put option in the end of next year.

Rating

Maintain OUTPERFORM as it is trading significantly below its net realisable value of RM0.66 (after taking out prepayment asset for jack up and applying 20% discount).

Valuation

TP is reduced to RM0.45 from RM0.59 previously as we peg it to a lower FY16 PBV of 0.4x (close to 2SD below 7- year mean) from 0.5x in view of weaker rig market and resumption of oil price downtrend.

Risks to Our Call

(i) Larger-than-expected write down on assets and (ii) further weakening of jack-up rig market

Source: Kenanga Research - 13 Aug 2015