We deem PPT’s lower FY13 earnings a temporary blip as FY14 and FY15 earnings  are  expected  to  improve  due  to  contributions  from  new business.  We  believe  it  is  time  to  accumulate  the  stock  after  the market’s recent negative reaction to the expiry of its contracts. Our new MYR1.62  FV  (from  MYR1.58)  is  based  on  a  higher  target  FY14  P/E  of 18x, but lower than that of its comparable peer. Maintain BUY.

• First jack-up rig by June  2014.  PPT’s jack-up rig (JU),  Perisai Pacific 101  (PP101),  which  is  currently  being built by Sembcorp Marine  (SMM SP,  BUY,  FV:  SGD5.40),  is  scheduled  for  delivery  in  June  2014. Management is upbeat  on  the prospect  of  a charter  contract. We echo this  view considering  the  strong demand for premium JUs  in Asean. We incorporate  a  daily  charter  rate  of  USD150,000/day  into  our  FY14/15 earnings  estimates,  in  line  with  the  market  rate.  The  segment  is estimated to contribute significantly in FY15  after  the arrival of a second similar JU in 2QFY15.   
• Six  months’  downtime  for  Rubicone.  We  lower  our  idle  time assumption  on  PPT’s  mobile  offshore  production  unit  (MOPU), Rubicone,  to six  months  from nine. Management reaffirmed its  focus  on this business segment, which we estimate  will  contribute 19% and 12% to profit after tax (PAT) for FY14 and FY15 respectively.
• Bidding  for  Pan  Malaysian  transport  &  installation  (T&I)  projects. PPT  is  qualified  to  bid  for  two  out  of  five  packages  using  its  derrick pipelay barge,  Enterprise 3  (E3),  owned by SJR Marine, which is jointlycontrolled with EOC Ltd (51:49). We believe E3 stands a good chance of winning either job as it meets the requirements of both packages.
• Significant  contribution  from  FPSO  segment  from  FY14. Management  revealed  that its  51%-owned  FPSO,  Perisai Kamelia,  will only  start  contributing  significantly  to  revenue  from  FY14  onwards,  at USD90m  (MYR286m)  yearly.  The  estimated  PAT  margin  is  30%, representing 35% and 20% of PAT for FY14 and FY15 respectively.
• Maintain  BUY,  with  MYR1.62  FV.  Following  our  recent  meeting  with management and a revamp of our model,  we revise  lower  our earnings estimate  for  FY14  (-19%)  onwards  to  reflect  PPT’s  future  earnings potential. We raise our FY14 target P/E to 18x (from 14x) - still at a 28% discount  to  drilling  assets  owner,  UMW  Oil  &  Gas  (UMWOG,  NR,  FV:MYR3.43).  A  discount is warranted  since  PPT  is a relatively new player in the drilling segment compared to UMWOG.

Financial Exhibits

• Contributions  from  its  drilling  and  FPSO segments  are  expected to kick in  from FY14 onwards
• PPT’s  offshore  support  vessels  (OSV)  and FPSO  segments  will  generate  recurring income  needed  to  fund  its  acquisition  of drilling assets

SWOT Analysis

Company Profile
Perisai Petroleum is an oil & gas service provider owning a floating production, storage and offloading (FPS O) vessel, a mobile operating production unit (MOPU), a pipelay barge and eight offshore support vessels (OSVs) with up to two jack-up rigs on order.

Recommendation Chart

Source: RHB