Period

2Q15/1H15

Actual vs. Expectations

The group posted a loss of RM3.5m in 2Q15, bringing its 1H15 net profit down to RM5.1m, below both our and consensus fullyear forecast at only 10.0% and 11.1% of full-year forecasts. This is due to lower-than-expected vessel utilisation amid weak O&G industry market. Our core net profit excludes RM8.2m unrealised forex loss.

Dividends

No dividends have been declared for the quarter.

Key Results Highlights

The group registered loss of RM3.5m in 2Q15 from profit of RM23.9m last year mainly due to significantly lower vessel utilisation (68% compared to 83% last year) as a result of lower work orders from its client as oil majors seek to cut costs.

Sequentially, it posted a loss of RM3.5m in 2Q15 as opposed to RM8.6m profit in the preceding quarter due to lower vessel utilisation of 68% compared to 76%, reflecting lower utilisation of vessel by its clients, post contract termination on one work boat and one work barge.

1H15 cumulative net profit came to RM5.1m, which was 88.6% lower than the RM44.8m achieved in the similar time period last year as its overall vessel utilisation dropped to 72% from 91% in the previous year probably owing to 3 work barges & boats not utilised due to premature contract termination.

Outlook

PERDANA has taken delivery of Emerald, a 300-pax accommodation barge in 4Q14. It has replaced Enterprise, which is serving a multi-year contract running up to Feb 2016.

PERDANA is likely to be the least exposed OSV player to renegotiation of rates by Petronas as it is already providing relatively low rates compared to its peers (DCR of USD1.9/bhp vs. USD2.2-2.3/bhp by other OSV players) given that the contracts were won pre-rebound cycle (i.e. 2013).

However, its long-term charter contracts to DAYANG is at risk as Shell looks to slow down work orders for their HUC contract this year in lieu of weak oil prices. This will in turn increase the possibility of premature charter contract termination for the group.

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.

Funding for the 1st work barge, SK317, will be sourced from internal cash funding and debt. However, we expect further delays for the delivery of its two upcoming barges (SK317 & SK318) in view of weak market environment.

Change to Forecasts

We revise our FY15 forecast to a loss of RM3.1m from profit of RM51.2m previously as we revise our vessel utilization for AHTS and work barges & boats to 65% from 75% previously.

FY16 CNP was cut by 60.8% to RM32.6m after taking out earnings assumptions from its two upcoming work barges and lowering vessel utilization to 75% from 80% previously in view of expected weak oil prices for the coming two years.

Rating

Maintain MARKET PERFORM. The MGO has closed on 13th August 2015 with DAYANG (MP; TP: RM1.67) holding 94.8%; we recommend the remaining shareholders who have not accepted the offer who possess the right to sell DAYANG their shares at RM1.55/share no later than 21st November 2015.

Valuation

TP maintained at RM1.55 based on DAYANG’s offer price due to the rights to sell to DAYANG at the same price for the remaining shareholders.

Risks to Our Call

Weaker-than-expected utilisation rates of vessels on spot charter.

Unexpected supply shocks in the oil market.

Source: Kenanga Research - 26 Aug 2015