PENB’s 1H13 core net profit of MYR4.1m  was  broadly  in  line  with expectations.  While  earnings  only  reached  18.1%  of  our  and  18.6%  of consensus  full-year estimates,  2H13  earnings  are  expected  to  be  lifted by  maiden  contributions  from  new  contracts.  We  leave  our  forecast unchanged.  Given  the  recent  selldown,  we  see  it  as  an  opportunity  to accumulate the shares. Maintain BUY, FV unchanged at MYR2.70.

- In line. PENB’s 1H13 core net profit of MYR4.1m accounted for merely 18.1%  of  our  and  18.6%  of  consensus  full-year  estimates.  This  was mainly  due  to  lower  revenue  (+36.4%  q-o-q;  -28.1%  y-o-y),  which  was weighed down by lower activities executed by its hook-up commissioning (HUC)  and  topside  maintenance  division,  and  lower  revenue  from  its offshore  marine  support  services.  Despite  profitability  falling  short  of expectations, we deem it in line, as earnings in 2H13 are expected to be lifted by maiden contributions from its new HUC contract.

- Short-term  pain  for  long-term  gain.  We  leave  our  earnings  estimate unchanged  for  now,  as  earnings  in  2H13  could  be  lifted  by  maiden contributions  from  its  new  HUC  contract  secured  earlier  this  year.  That said,  we  remain  cautious  about  potential  mobilisation  costs,  which  are generally  incurred  at  the  start  of  a  new  project.  While  this  may  weigh down earnings for 3Q13, it will pave way for stronger earnings in FY14.

- Acquisition of new business completed. Besides the quarterly results, PENB also announced that it has successfully completed the acquisition of  its  new  subsea  business.  Recall  that  its  100%  owned  PE  Ventures bought  a  51%  stake  in  Bumi  Subsea,  which  has  a  Petronas  licence  to primarily  undertake  underwater  inspection,  repair  and  maintenance (IRM) jobs. We remain positive on this acquisition, as there are multiple IRM contracts that are due to be awarded later this year.

- Maintain BUY. All in, we still see catalysts in the form of order wins from its  IRM  business  and  recovery  of  investor  confidence  in  the  stock  once the worst is proven to be over in FY14. Our FV of MYR2.70 is pegged to 15.0x (in line with the oil & gas sector verage) of its FY14 earnings and includes a DCF for its marginal oilfield worth MYR0.23 per share. 

Source: RHB