UOB maintains ‘buy’ on Perisai, TP RM1.64

by **Cals** Mon 25 Mar 2013, 15:59

UOB maintains ‘buy’ on Perisai, TP RM1.64
Business & Markets 2013
Written by Shalini Kumar of theedgemalaysia.com
Monday, 25 March 2013 15:47

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KUALA LUMPUR (Mar 25): UOB KayHian Research is maintaining its "buy" call on Perisai Petroleum Bhd with a target price (TP) of RM1.64.

Perisai was last traded at RM1.10, up 4 sen.

In a note today, UOB analyst Jonathan Lai said UOB expects Perisai to return to investors' radar by 2H13.

“Perisai's share price has traded sideways year to date, following an impressive run-up at end-12. Nevertheless, we expect the shares to storm back by 2H13 as valuation rises in anticipation of rising earnings and Perisai securing its first ever rig contract,” said Lai in his report.

Besides finalising its 51%-stake acquisition in the FPSO and the commencement of earnings recognition in 2H13, the key re-rating catalyst for Perisai would be the winning of their maiden rig contract.

A typical rig contract is expected to deliver RM40 million to RM50 million to bottom-line, based on a charter rate of US$150,000/day.

“We expect the 51%-stake acquisition in the FPSO to be finalised by 2Q13. This acquisition should lift 2013-14F earnings by 12-23% respectively while the fully-diluted EPS should increase by 1-12%. We have included the new contribution in our earnings estimates,” he said.

Perisai has placed an order with SembCorp Marine to acquire a high-spec jack-up rig for US$208 million, which will be delivered by July 14.

Securing a rig contract will lift its 2014F earnings by RM33 million or 28% while fully-diluted EPS (assuming another 10% new share issuance) will rise by another 18%.

“In the medium term, securing contracts for its rigs signifies a tremendous transformation for Perisai. Eventually, we believe Perisai will dispose of existing non-core assets and move up the value chain to the drilling and production segment,” said Lai.

“As there is demand for new rigs on the back on Petronas’s hefty capex spending over the next five years. The two new jack-up rigs would not only jack up Perisai’s earnings but also broaden the company’s asset base which would in turn allow it to bid/secure more contracts,” he added.