Perisai disappointed with a 9MFY14 core profit of MYR0.33m, well below our  and consensus estimates. The disappointing numbers were  due tothe  underutilisation of  two  marine assets  and higher finance cost from borrowings. We remain  wary of its future earnings,  hence we slash our FY14F/FY15F numbers by 95%/38%. Downgraded to  SELL with a lower TP of MYR0.88 from MYR1.46 (14.6x FY15F P/E, 11.9% downside). 

9MFY14  core  profit  of  MYR0.33m  well  below  expectations.  Perisai Petroleum  Teknologi’s  (Perisai)  9MFY14  revenue  of  MYR66.4m  was down  32.2%  YoY,  dragged  down  by  the  underutilisation  of  its  mobile offshore  production  unit  (MOPU)  Rubicone  and  its  derrick  lay  barge (DLB)  Enterprise 3.  Revenue was mainly supported by its nine offshore support  vessels  (OSV),  currently  on  long-term  charters,  and  maiden contribution from its jack-up rig,  Perisai Pacific 101,  currently operating off the coast of Terengganu. 

FY15 earnings still uncertain.  Rubicone and Enterprise 3 are still idle,and we estimate  that  for every month these assets are idle, Perisai will be  bleeding  out  MYR2m  in  depreciation,  manpower  as  well  as  yard space rental for each vessel. W e believe these vessels will not be seeing any action in FY14 and will only be chartered out in FY15.  Recall that Perisai  will take delivery of two jack-up rigs, Pacific 102 and Pacific 103, in  mid  FY15  and  FY16  respectively.  These  two  rigs  are  still  without  a contract and tarigs  on  delivery.  On  another  note,  Perisai’s  total  borrowings  currently stand  at  MYR1.1bn,  taking  its  gearing  level  to  0.91x.  Management guided that its medium-term notes incurred an interest cost of MYR5m YTD.  

Downgrade to SELL  with TP of MYR0.88  (from MYR1.46).  We lower our  earnings  for  FY14/FY15  by  95%/38%  as  we  take  into account  the higher  financing  costs  as  well  as  reduce  our  vessel  utilisation assumptions for the two idle vessels. Our lower TP of MYR0.88 is based on 14.6x FY15F  P/E, a 20% discount to the mid-cap oil and gas stocks under our coverage. We lower the stock to SELL from Neutral due to thebleak earnings outlook for Perisai.

Source: RHB