Petra Energy may get more jobs

by **Cals** Tue 14 May 2013, 12:05

Petra Energy may get more jobs
Business & Markets 2013
Written by RHB Research
Tuesday, 14 May 2013 10:09

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PETRA ENERGY BHD []
(May 13, RM2.17)
Maintain neutral at RM2.07 with a target price of RM2.17: While the value of the three-year contract was not stated in the announcement, we understand from management that it is worth about RM40 million. The contract win will only affect our revenue forecasts by less than 2%.

We believe that Petra Energy is also a strong contender for jobs from the Pan Malaysia hook-up and commissioning (HUC) project, apart from DAYANG ENTERPRISE HOLDINGS BHD [] (“buy”; fair value: RM5.00). Based on our new order win assumption of RM2 billion versus RM1.2 billion previously, this may translate into an annual order book replenishment of RM400 million, compared with our previous forecast of RM240 million.

In line with our assumption of higher orders, we raise our 2013 financial year (FY13) and FY14 revenue forecasts by 11.1% and 20.3%. This lifts our net profit forecasts by 25.5% for FY13 and 41.8% for FY14.

We retain our view that the company’s prospects in FY13 are benign. As we raise our FY14 earnings forecast, we now value the stock at RM2.17, pegged to 15 times FY14 earnings per share (EPS), and include a discounted cash flow valuation of Petra Energy’s marginal oilfield at 23 sen. The stock is currently trading at 16 times FY14 EPS, which is slightly above the sector average of 14.6 times FY14 EPS. Maintain “neutral”, as we find the stock’s current valuation unattractive. — RHB Research, May 12

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