Perisai optimistic of new contracts

by **Cals** Mon 14 Oct 2013, 10:15

Business & Markets 2013

Written by CIMB Research

Monday, 14 October 2013 09:28

PERISAI PETROLEUM TEKNOLOGI [] Bhd
(Oct 11, RM1.35)
Maintain outperform at RM1.29 with a revised target price of RM2.48 (from RM2): Perisai’s management is taking the unfortunate timing of the expiry of two contracts into its stride. These contracts involve Rubicone and Enterprise 3. Rubicone is a Malaysian flagged ABS Class mobile offshore production unit (MOPU) while E3 is a ABS Class A1 Derrick pipelay barge.

At a meeting on Oct 10, management appeared optimistic of clinching new jobs for the two assets as it ventures into the floating, production, storage and offloading (FPSO) and drilling segments.

We cut our 2013 financial year ending Dec 31 (FY13) to FY14 earnings per share (EPS) to account for the downtime for Rubicone and E3, but we maintain our FY15 EPS. Despite the earnings cuts, our target price rises as we roll it forward. We now value Perisai at a 2015 calendar year price-earnings ratio (PER) of 15.6 times, which is still at a 30% discount to the PER of oil and gas big caps. The stock remains an “outperform” and our top pick among oil and gas small caps.

Successful FPSO and drilling ventures are potential rerating catalysts. There were no surprises from our meeting with management. It expressed confidence in securing new contracts for Rubicone and E3 while its FPSO vessel, Perisai Kamelia, is being readied to start production at the North Malay Basin later this month.

Management’s optimism in getting new contracts for Rubicone and E3 is comforting. We understand that there is no shortage of work for MOPUs and pipelay barges in Southeast Asia.
Stay invested and focused on the big picture. Although the non-extension of contracts for Rubicone and E3 will make a dent in FY13 to FY14’s earnings, Perisai’s longer-term prospects remain attractive given its entry into the high-margin FPSO and drilling segments. — CIMB Research, Oct 10

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This article first appeared in The Edge Financial Daily, on October 14, 2013.[/color]