News  Last week, Perdana Petroleum (PERDANA) won a letter of award from Talisman Malaysia Limited for the supply one Anchor Handling Tug Supply (AHTS) vessel.

 The firm duration of the contract is one year with an optional additional one year extension.

 The total value of the contracts is approximately RM50.0m (inclusive of the optional period if exercised by the client).

Comments  We are positive on this contract win as it illustrates that there are still OSV contracts out there; and possibly more over the horizon; Hence, contract replenishment opportunities for OSV players which still have vessels like PERDANA.

 We believe this is a 10k bhp vessel, hence average daily charter rate (DCR) for the contract is c.USD2.10-2.20/bhp; which is pretty decent for such vessels.

Outlook  Medium-to-long-term prospects are stable on the back of PERDANA’s long-term contracts. For its existing vessels, at least 10 are chartered till 2018-2019 and another three are booked till 2014-2015.

 Currently, only three vessels (one accommodation barge and two 5kAHTSs) are on spot charters and PERDANA is confident of securing recurring contracts.

 Longer-term prospects will hinge on PERDANA’s future fleet expansion which we believe management will broach after it mobilises all vessels needed for the DAYANG project by next year.

Forecast  Whilst we have already imputed a USD2.20bhp per day assumption for the aforementioned 10k bhp vessel, we believe our exchange rate assumptions are too conservative at USD1:RM2.91. Hence, we are lifting our assumptions to USD1:RM3.09 (in line with our 2014 Market Strategy).

 This boosts our FY14 net profit by 3.4% to RM91.3m (from RM88.3m).

Rating Maintain OUTPERFORM

Valuation  We have moved our target PER to 15.5x (from 15x, in line with PERDANA’s 1.5 historical standard deviation forward level seen in 2006-2008) as we believe it is moving towards near full-capacity for its vessel contracts.

 Our target price is thus bumped up to RM1.95 (from RM1.82). With a targeted upside of 15%, we maintain our OUTPERFORM call.

Risks to Our Call (i) Lower than expected daily charter rates and utilisation rates and (ii) sudden downturn in crude oil prices that could adversely impact the offshore oil and gas services industry.

Source: Kenanga