PETR announced on Friday that it had terminated a bareboat charter on 3 vessels but has instead  entered into MoAs  to acquire  them for a total of USD50m. Thus, we increase our FY14 earnings forecast marginally to reflect  the  new assets but lower our FY13 earnings estimate by 25% on an  anticipated  weaker  4Q13.  Maintain  NEUTRAL,  with  our  FV  at MYR1.82, based on a target FY14 P/E of 13x.

• Terminates  charter  but  buying  over  vessels  involved.  PETR announced on Friday that it had mutually agreed to terminate a bareboat charter  arrangement  on  three  vessels  with  Mount  Bintang  LLC  and Mount Bubu LLC. The vessels are a workboat, Perdana Liberty, and two anchor  handling  tug  supply  (AHTS)  vessels,  the  Perdana  Horizon  and Perdana  Frontier.  Via  its  100%-held  subsidiary,  Perdana  Pluto  Ltd, PETR  entered  into  a  memorandum  of  agreements  (MoA)  with  both Mount  Bintang  and  Mount  Bubu  to  acquire  the  vessels  for  a  total  of USD50m.  We estimate that Perdana Horizon  and  Perdana Frontier  will marginally  lift  FY14’s  bottomline  by  2%  to  MYR68.9m  as  we conservatively assume these vessels will be on spot charter.
• Funding  via  mix  of  internal  funds  and  bank  borrowings.  The acquisitions  will  be  funded  via  internally-generated  funds  and  refinancing  facilities  of  amounting  to  USD34m.  This  will  raise  the company’s gearing to 0.9x from 0.7x.
• RY14  set  to  be  a  good  year.  Major  works  for  Dayang  Enterprise’s (DEHB  MK,  BUY,  FV:  MYR)  topside  major  maintenance/hook-up construction and commissioning (TMM/HuCC)  project  will start in FY14. According to the management, including the vessels chartered to DEHB, 15  of  PETR’s  17  vessels  are  now  on  long-term  charters.  Its  current orderbook totals MYR1.4bn, with five years’ earnings visibility.
• Maintain  NEUTRAL,  with  MYR1.82  FV.  We  lower  our  FY13  earnings estimate by  25% as  the  utilization of  PETR’s  vessels will remain low in 4QFY13. Management informed us  that at least four of its vessels were docked for sea-worthiness evaluation during the year.  However, we  lift our  FY14  earnings  estimate  by  2%  as  we  anticipate  better  utilization owing to  long  term contracts. We peg the stock to  a  target FY14 P/E of 13x, in line with other small-cap oil & gas (O&G) stocks.

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

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Source: RHB