We consider  Perisai’s 1QFY14 core net  loss  of MYR2.8m  to be  in  line with  our  estimate,  as  2HFY14  is  expected  to  be  stronger.  1QFY14 weakness  was due to the absence of  contribution from  Rubicone  and E3.  We  expect  Kamelia  and  PP101  to  shore  up  FY14  earnings  as management continues to pursue contracts for its idling Rubicone  and E3. Retain BUY; FV MYR2.07 unchanged, pegged to FY15 P/E of 15x.

• 1QFY14  earnings  in  line.  Quarterly  core  net  loss  of  MYR2.8m  was  a 68.9% q-o-q  and  112% y-o-y  drop, respectively.  We consider  this to be in line: we believe earnings will be stronger in 2HFY14 as its first jack-up (JU)  drilling rig,  Perisai Pacific 101  (PP101),  is expected to  have started contributing  to  earnings.  Similar  to  4QFY13,  there  was  no  contribution from its mobile  offshore  production unit (MOPU),  Rubicone  and derrick lay  barge  (DLB),  Enterprise  3  (E3)  in  1QFY14.  Its  51%-owned  floating production,  storage  and  offloading  (FPSO)  unit,  Perisai  Kamelia (Kamelia) contributed in 1QFY14 as the field had hit oil in late Nov 2013.
• PP101  and  Kamelia  are expected to shore up earnings.  We  expect FY14 earnings  to come from contributions from  Kamelia.  We impute  six months  contribution  from  PP101  as  the  JU  unit  is  expected  to  be deployed by 2HFY14.  We maintain our expectation that E3  could  reach approximately  50%  utilisation  rate  in  FY14.  We  believe  that  the  vessel will  likely  be  subcontracted  by  winners  of  the  transport  &  installation (T&I)  contracts  awarded  late  last  year  worth  approximately  MYR10bn. We  understand  that  more  than  one  work  barge  may  be  required  to perform the work orders. Activity  has  been slow in the 1HFY14 and we expect momentum to pick up by 2HFY14 after the  end of the  monsoon season.
• Maintain  BUY  with  FV  MYR2.07.  We  leave  our  FY14/FY15  forecasts unchanged.  We maintain our BUY call with unchanged FV of MYR2.07 based  on  target  FY15  P/E  of  15x,  35%  discount  to  UMW  Oil  &  Gas’ (UMWOG  MK,  NR)  FY15  implied  P/E  of  23.1x.  The  discount  is  to account  for  its  lack  of  track  record  in  this  new  drilling  division  and  its smaller fleet of JU drilling rigs. We like Perisai as it is a cheaper proxy to the  drilling  rig  space  in  Malaysia.  A  higher-than-expected  daily  charter rate of its second JU unit  -  expected to be delivered in 2QFY15  -  could provide earnings upside. We also cautiously expect Rubicone  to  only be chartered in FY15. 

Source: RHB