Petra Energy's 1QFY13 net profit of MYR2.2m was lower than expected, accounting  for  merely  8.0%  of  our  and  6.9%  of  consensus  full-year estimates. Following the weaker earnings, we lower our FY13 and FY14 earnings  forecasts  by  15.0%  and  5.6%  respectively,  and  retain  our NEUTRAL recommendation, with a lower FV of MYR1.95.

-  Weaker than expected. Petra Energy (PENB MK) posted a revenue of MYR92.4m  for  1QFY13  (-29.6%  y-o-y,  -51.7%  q-o-q)  on  weaker  than expected  contributions  from  its  main  business  segments:  i)  integrated brownfield  maintenance  and  engineering,  ii)  onshore  civil  engineering, and  iii)  offshore  marine  support.  This  resulted  in  a  weak  1QFY13  net profit of MYR2.2m, down 69.2% y-o-y. Q-O-Q, core profit returned to the black  due  to  the  higher  wages  and  maintenance  costs  incurred  in 4QFY12 for the marine vessels and offshore equipment tools.

- Core  business  loss  weighs  down  on  earnings.  Its  integrated  brown field maintenance and engineering division’s revenue plunged 30.7% y-o-y  due  to  the  lower  utilization  of  vessels,  resulting  in  a  pre-tax  loss  of MYR7.3m,  vs.  the  MYR3.1m  pre-tax  profit  in  1QFY12.  Meanwhile,  its onshore  civil  engineering  services  segment  recognized  no  revenue  but 
nonetheless recorded a PBT of MYR13.0m due to the recognition of the final settlement and contract closure for the Kumang project.

- Lowering FY13 and FY14 earnings forecasts. We lower our FY13 and FY14  revenue  forecasts  by  15.0%  and  5.6%  respectively  to  reflect  the weaker earnings and lower revenue assumptions for its other divisions, but  retain  our  MYR2bn  order  win  assumption  from  the  Pan-Malaysia hook-up  and  commissioning  (HUC)  tender.  We  lower  our  earnings forecasts for FY13 and FY14 by 30.4% and 11.4% respectively as well.  

- Maintain  NEUTRAL,  FV  trim  to  MYR1.95.  In  line  with  our  earnings downgrade, we lower our FV to MYR1.95. Our FV is based on 15x FY14 EPS, and includes a DCF valuation for its marginal oilfield at MYR0.23. The  stock's  valuation  is  unattractive  at  18.7x  FY14  EPS,  which  is  at  a premium  over  the  average  sector  PER  of  15.5x FY14 EPS (RHB’s coverage).

Source: RHB