Sailing through fifth profitable quarter -PERDANA

by **Cals** Thu 22 Aug 2013, 10:28

Sailing through fifth profitable quarter
Business & Markets 2013
Written by CIMB Research
Thursday, 22 August 2013 09:50

Perdana Petroleum Bhd
(Aug 20, RM1.85)
Maintain outperform at RM1.83 with a target price of RM2.40: Life's a beach for Perdana Petroleum, which sailed through a fifth straight profitable quarter in the second quarter ended June 30 of 2013 financial year (2QFY13). This led to a solid first half (1H) FY13 performance that broadly met expectations at 48% of our full year forecast and 46% of consensus'. Its performance was propelled by improvements in charter and utilisation rates.

We continue to value the stock at a 2014 calendar year price-earnings ratio (PER) of 15.6 times, which is at a 30% discount to the PER of oil and gas big caps.

Perdana Petroleum remains an “outperform”, with a stronger uptick in earnings as a potential rerating catalyst. As expected, the company did not declare any dividends.

Perdana Petroleum turned in a core net profit for the fifth consecutive quarter. 2QFY13 net profit soared by a robust 158% year-on-year to RM13 million. 1HFY13 net profit amounted to RM24 million, a major improvement on 1HFY12's net loss of RM3 million. This substantial earnings improvement came mostly from a rise in the vessel charter rates from an average of US$1.50 (RM4.94) to US$1.80 per HP in 2QFY12 to around US$2 per HP in 2QFY13. Utilisation rates inched up from 74% in 2QFY12 to 75% in 2QFY13.

Perdana Petroleum has been on a roll, landing RM1.2 billion worth of contracts year-to-date, of which 59% consist of the supply of five workbarges and a workboat for five years commencing July 2013, with an extension option of another year, to major shareholder DAYANG ENTERPRISE HOLDINGS BHD []. The contract fits Perdana Petroleum's focus in securing more longer-term charters to provide stability to its earnings.

Perdana Petroleum has contracted Nam Cheong Ltd to build a work barge for US$29.5 million. The work barge will be Perdana Petroleum's 18th asset and eighth work barge. The company has yet to secure a contract for the barge, but it is likely to be chartered to Dayang Enterprise upon delivery in 3Q14.

The barge could expand Perdana Petroleum's FY15 earnings per share by 6.5%, based on the assumptions of: (i) daily charter rate of US$24,000; (ii) vessel utilisation of 80%; and (iii) net margin of 25%. We maintain our forecasts for now. — CIMB Research, Aug 21

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This article first appeared in The Edge Financial Daily, on August 22, 2013.