Perdana Petroleum has made  a USD84m (MYR270m)  order to purchase two 500-man accommodation work barges (AWBs).  We continue to be positive on its fleet modernisation strategy,  as  these would be  the first mega AWBs in Malaysia. We maintain our forecasts, since contributions as well as finance costs are  expected to come in upon delivery  of the vessels in 1H16. Maintain BUY and our FV of MYR2.20 (16x FY15F P/E).

• Asset  growth  continues.  Perdana  Petroleum  continues  with  its  fleet modernisation  plans  by  purchasing  two  500-man  AWBs  from  Nam Cheong  Ltd  (NCL  SP,  BUY,  FV:  SGD0.53)  for  USD84m.  There  is  an option to buy  two further units, which could bring up the purchase price to USD168m if exercised. We view this positively as Perdana Petroleum continues with its asset growth strategy of 2-3 vessels per year, on top of the delivery of two 300-man AWBs in FY14 (none slated for FY15 yet).
• Daily charter rates (DCRs) still unknown. As the vessels are expected to  be  the  first  of  their  kind  in  Malaysia,  we  believe  that  they  could  be quickly chartered for local jobs that require large AWBs. They could also be  used  to  compete  for  overseas  jobs.  Therefore,  it  is  likely  that  the mega AWBs could command  favourable DCRs,  given the demand. This is comparable to the industry rate for  an AWB, which is between  USD70 and USD110 per bed per day, and  that of  Perdana Petroleum’s existing 300-man AWBs,  which have a  DCR of USD80-93 per bed per day (or USD25-28k/day).
• FY14F/15F forecasts remain  unchanged  as the contributions and the bulk  of  the  gearing  will  only  be  incurred  along  with  the  delivery  of  the AWBs in 1Q/2Q16. 80% of the payment will be made during the delivery dates. Nevertheless, the AWBs could result in a >10% accretion on profit growth,  as we take  into account  the company’s  10% revenue accretion and higher finance expenses.
• Maintain  BUY  with  a  MYR2.20,  reflecting  an  unchanged  16x  FY15F P/E. Our valuation is supported by a 63% 2-year forward earnings CAGRas well as the company’s status as a pure offshore support vessel (OSV) player. It is set to be a regional brownfield charterer , as it aims to secure contracts outside of Malaysia, ie in Vietnam, Thailand and Myanmar. We like its young fleet (average  age of 4.5 years),  although any increase in the  supply  of  high  large  greenfield  assets  could  pose  a  risk  to  its competitiveness.  Currently,  three  of  its  18  vessels,  ie  two  5k-brake horsepower  anchor  handling  tug  and  supply  vessels  and  SK312 Emerald, are involved with tenders worth a total of ~MYR300m.

Source: RHB