Perisai Petroleum Teknologi  (PPT)’s FY13 net profit of MYR71.8m  made up  only  93%/91%  of  our/consensus  estimates.  The  poor  performance was  attributed  to  the  non-extension  of  contracts  for  Rubicone  and Enterprise  3  (E3).  We  upgrade  the  stock  to  BUY,  with  a  new  FV  of MYR2.28 (from MYR1.62), based on a target FY14 P/E  of 20x (from 18x), which is still a discount to UMW Oil & Gas’ 30x.

• FY13  results  below  expectation.  PPT’s  full-year  FY13  net  profit  of MYR71.8m  made  up  only  93%  and  91%  of  our  and  consensus’ estimates. The poor performance was attributed to the non-extension of contracts  for  its  mobile  offshore  production  unit  (MOPU),  Rubicone  in 2QFY13  and  its  derrick  lay  barge,  Enterprise  3  (E3)  in  3QFY13.  As  a result,  FY13  revenue  and  net  profit  declined  13%  and  22%  y-o-y respectively.
• 4QFY13 took the brunt. We had  expected 4QFY13 to be a bad quarter mainly because  Rubicone  and  E3  effectively stopped contributing  after 3QFY13 and 4QFY13 respectively. These vessels previously accounted for around 40% of its earnings. However, we do not expect these vessels to  remain  idle  throughout  FY14  and  conservatively  assume  a  50% utilisation rate for each vessel in FY14.     
• Time  to  move  on  after  a  bad  FY13.  We  believe  PPT’s  FY13 performance  is  just  a  temporary  blip  to  its  otherwise  decent  financial performance.  The  group’s  estimated  FY14/15  earnings  growth  of 31%/79%  will be driven by its new  business  unit  –  the drilling segment. We reaffirm our stance that PPT will be able to secure charter contracts in both domestic and international water s,  considering demand for new rigs to replace older ones is still strong.    
• Upgrade  to  BUY  from  Neutral;  new  MYR2.28  FV.  We  upgrade  the stock to BUY (from Neutral) with a higher MYR2.28  FV  (from MYR1.62),based  on  a  higher  target  FY14  P/E  of  20x  (from18x),  but  still  at  a discount to UMW Oil & Gas  (UMWOG MK,  NR)’s  current FY14 P/E of 30x. The group’s estimated  FY14/15 earnings  are expected to  grow  by 31%/79% respectively,  driven by its new income stream from  the drilling segment.  We keep our FY14/15 forecasts unchanged,  as our numbers have already  reflected contributions  from PPT’s first two rigs, slated to be delivered by 2QFY14 and 3QFY15.   

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SWOT Analysis

Company Profile
Perisai Petroleum is an oil & gas service provider owning a floating production, storage and offloading (FPSO ) 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.

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Source: RHB