PENB’s  FY13  core  net  profit  reached  only  45%  of  both  our  and consensus estimates. The miss was largely  on  lower TMM/HuCC works commissioned  in  FY13. We lift FY14-15 earnings  forecasts  by 5%  each on  expectation  of  increased  activities  from  the  earlier  TMM/HuCC contracts as well as potential vessel charters. Maintain NEUTRAL with a SOP-based FV of MYR2.43 (from MYR2.45).

• Missing  estimates.  After  adjusting  for  negative  goodwill  and  the impairment  arising  from  the  write-down  of  a  vessel,  Petra  Energy (PENB)’s  FY13  core  net  profit  of  MYR7.7m  reached  only  45%  of  both our  and  consensus  estimates.  The  miss  was  largely  due  to  our  overoptimism  on  topside  major  maintenance  and  hook-up  construction  & commissioning  (TMM/HuCC)  works  that  we  believed  would  start  in FY13.  Management  said  these  projects  have  yet  to  gain  traction. Revenue  declined  25%  y-o-y  after  the  completion  of  certain  works throughout FY13.  No revenue  was  recorded after the completion of the Kumang cluster tie-in project but  PENB booked  a MYR13.2m  PBT  from the  recognition  of  a  final  settlement  following  its  completion.  It  also declared a single-tier interim dividend of 1 sen/share for FY13.  
• The silver lining.  The integrated brownfield maintenance & engineering services  segment  reported  a  wider  loss  of  MYR18.6m  in  4Q13  vs MYR3.6m in 4Q12 (3Q13: MYR2.5m  loss) at PBT level.  This appeared to  be  disappointing,  but  could  be  due  to  high  mobilisation  costs  in preparation for more TMM/HuCC works in FY14 onwards.
• Earnings driver in FY14. FY14 may be the year of earnings turnaround as  works under the TMM/HuCC projects are expected to pick up pace. Management  said  that it is looking to charter  more  vessels to carry out such works. This, therefore,  prompts  us to raise our FY14/15 earnings estimates  by a relatively conservative 5% for  each  period. Furthermore, last  year’s  MYR10bn  in  transportation  and  installation  projects  by Petronas may require vessels from PENB’s fleet.   
• Maintain  NEUTRAL  with  new  FV  of  MYR2.43  (from  MYR2.45).  We maintain  our  NEUTRAL  call  with  lower  SOP-based  MYR2.43  FV  after adjusting for higher  net debt level  as  at end-FY13.  Proper execution of the  MYR3.5bn  TMM/HuCC  contract  will  be  key  to  driving  up  earnings from FY14 onwards and will help re-rate the stock further.

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Company Profile
Petra Energy's principal activities are in the provisioning of brownfield oil & gas services.

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Source: RHB