PETR’s  9MFY13  core  net  profit  of  MYR26.4m  was  below  our  and consensus’  full-year  estimate,  at  55%  and  52%  of  both  forecasts respectively. We see FY14 earnings being boosted by DEHB’s contracts but  4QFY13  earnings  will  be  seasonally  weaker  due  to  the  monsoon season.  The  upcoming  2-for-5  bonus  issue  will  enhance  trading liquidity. Maintain NEUTRAL and MYR1.80 FV, based 12.8x FY14 P/E.

• 9MFY13 net profit below our/consensus’ full-year estimates. PETR’s 9MFY13 core net profit of MYR26.4m was below our and consensus’ full year estimates,  making up 55% and 52% of both forecasts respectively. Revenue  dipped 4.9% q-o-q  and 9%  y-o-y to MYR68.2m  due to a lower utilization rate  owing to the mobilisation of new deliveries,  the  upgrading of  vessels  and  the  scheduled  dry-docking  of  a  vessel  in  3QFY13. 9MFY13 saw a marked improvement in gross profit (GP)  margin  to  31% vs 9M2012’s 20%, but  this  could not offset the absence of contribution from an associate that was sold in FY12. We expect 4QFY13 earnings to be  slightly  weaker  than  the  current  quarter  due  to  the  upcoming monsoon season.
• 2-for-5  bonus issue.  The company announced a  bonus issue  of up to 222.6m new  shares on the basis of 2 bonus shares for every 5 existing PETR  shares.  This  exercise  will  enlarge  its  share  base  from  498.8m currently to 721.4m. The bonus issue will go ex on 3 Dec.
• 80% of vessels under long-term contracts. We expect the company to achieve  our  FY14  earnings  estimate  as  its  new  major  shareholder, Dayang Enterprise (DEHB MK, BUY, FV: MYR6.50),  is  chartering  more vessels from PETR. DEHB has secured MYR4.2bn worth of hook-up and commissioning (HuC) contracts this year for a period of 5+1 years.
• Maintain NEUTRAL, with MYR1.80  FV.  The stock offers good earnings visibility  of  at  least  five  years  considering  its  long-term  contracts  with DEHB.  Although we like the stock for its stable earnings and long  term earnings  visibility,  we  advise  investors  to  accumulate  on  weakness. Hence,  we  keep  our  MYR1.80  FV  unchanged,  based  on  a  new  target FY14 P/E of 12.8x, and maintain our NEUTRAL call on the stock.

Financial Exhibits

SWOT Analysis

Company Profile
Perdana Petroleum’s principal activities are in the provision of offshore marine support vessels and brownfield services.

Recommendation Chart

Source: RHB