Petra Energy informed Bursa Malaysia last Friday that it was awarded a contract from Sarawak Shell/Sabah Shell Petroleum to provide offshore crane  operations  and  maintenance  for  three  years,  with  an  option  to extend by one year. We understand that the contract value is fairly small – at less than 2% of our revenue forecast. Meanwhile, we raise our FV to MYR2.17 as we include more orders from the Pan-Malaysia HUC project. Maintain NEUTRAL.  

-  Latest order will have minimal impact on earnings. While the value of the  contract  was  not  stated  in  the  announcement,  we  understand  from Management that it is worth about MYR40m over the three-year duration. Hence  the  contract  win  will  have  minimal  impact  on  our  earnings forecasts as it will only affect our revenue forecasts by less than 2%.

-  MYR2.0bn worth  of  orders expected. We  believe that  Petra  Energy  is also  a  strong  contender  for  jobs  from  the  Pan  Malaysia  hook-up  and commissioning (HUC) project, apart from Dayang Enterprise (DEHB MK, BUY;  FV:  MYR5.00).  Based  on  our  new  order  win  assumption  of MYR2.0bn  vs  MYR1.2bn  previously,  this  may  translate  into  an  annual orderbook  replenishment  of  MYR400m,  compared  with  our  previous forecast for MYR240m.  

-  Raising  FY13  and  FY14  earnings  forecasts  on  higher  orders assumption.  In  line  with  our  higher  orders  assumption,  we  raise  our FY13 and FY14 revenue forecasts by 11.1% and 20.3%. This lifts our net profit forecasts by 25.5% for FY13 and 41.8% for FY14.  

-  Maintain NEUTRAL. We retain our view that the company’s prospects in FY13  will  be  benign.  As  we  raise  our  FY14  earnings  forecast,  we  now value  the  stock  at  MYR2.17,  pegged  to  15x  FY14  EPS,  and  include  a DCF valuation of Petra Energy’s marginal oilfield at MYR0.23. The stock is  currently  trading  at  16x  FY14  EPS,  which  is  slightly  above  the  sector average of 14.6x FY14 EPS. Maintain NEUTRAL, as we find the stock’s current valuation unattractive.

Source: RHB