SAKP  informed  Bursa  Malaysia  yesterday  that  its  subsidiary  TL Offshore SB was awarded a contract to provide installation services for offshore facilities in Vietnam. While this will not necessarily lead to the re-chartering of PPT’s Enterprise 3 derrick pipelay barge, we believe that it may enhance the Group’s chances of securing an extension. Maintain BUY,  with  a  higher  TP  of  MYR1.81,  as  we  peg  the  stock  to  14x  its  12-month forward earnings (previously 13x).

- Contract  due  for  renewal  at  end-June.  Perisai  Petroleum  Teknologi (PPT)’s derrick pipelay barge, Enterprise 3, is currently being chartered by SapuraKencana  Petroleum  (SAKP)  (BUY,  FV:  MYR4.96)  until  end-June. While  SAKP’s  contract  win  will  not  necessarily  translate  into  the  re-chartering  of  PPT’s  vessel,  it  may  still  enhance  the  latter’s chances of securing a contract extension.

- Downside risk still exists. We note that PPT is negotiating with SAKP to secure a contract extension. Assuming that the latter renews the contract for only one quarter, our FY13 earnings forecast may be reduced by some MYR10m, which represents 10% of our full year forecast. Our FV will then be  pared  down  to  MYR1.73,  which  still  makes  PPT  a  BUY based  on  the stock’s closing price yesterday.  

- Retaining  forecasts.  Our  earnings  assumptions  are  premised  on  PPT securing  re-chartering contracts  for  its derrick  lay  barge  Enterprise  3  and its mobile offshore production unit (MOPU) for the rest of FY13 and FY14. We have yet to include the potential earnings from its floating production, storage  and  offloading  (FPSO)  vessel  as  the  purchase  of  the  vessel  has yet to be completed. 

- TP  revised upwards to MYR1.81. While there is risk that the Enterprise 3  may  not  be  re-chartered  for  a  quarter  in  FY13,  we  retain  our  BUY recommendation  on  the  stock  as  our  TP  will  merely  be  reduced  to MYR1.73, which still justifies a BUY. We raise our  TP to MYR1.81 as we now peg the stock to 14x on its forward earnings (previously 13x), in line with the higher P/Es for offshore asset owners under our coverage.

Source: RHB