Perisai’s private placement exercise to raise RM165.9m cash

by **Cals** Tue 18 Feb 2014, 17:38

Business & Markets 2014

Written by Kenanga Research

Tuesday, 18 February 2014 10:16

Perisai Petroleum
Teknologi Bhd
(Feb 17, RM1.67)
Upgrade to outperform at a higher target price of RM2.53: Last week, Perisai announced a proposal for a 10% private placement exercise. At an indicative issue price of RM1.53 per share, the exercise will raise cash proceeds of RM165.9 million. Management guided that the placement exercise is to raise funds to pare down its debt and/or for capital investment for jack-up drilling rigs and/or mobile offshore production units (MOPU).

We were not surprised by the announcement as we had earlier expected Perisai to look for additional equity funding given that: (i) the remaining 80% payment (of about RM520) for its first rig is due soon; and (ii) it acquired a third jack-up drilling rig a month ago.

The exercise will lift its share base to 1.19 billion shares from 1.08 billion and result in a potential reduction in net gearing to 0.25 times (versus 0.7 times as at the end of financial year 2012 ended Dec 31 [FY12]) and interest savings of around RM2 million. However, this exercise will also lead to FY14 earnings per share (EPS) dilution of 7.4%.

Perisai’s fourth quarter (4QFY13) results will be released at the end of February and we believe they could be weak given that its derrick lay barge, Enterprise 3 (E3), and Rubicone MOPU are currently lying idle.

According to management, both the E3 and MOPU Rubicone are bidding for domestic and international projects. We believe Perisai will be able to secure contracts for its soon-to-be-delivered rig given that there are at least 17 rig contracts that are expiring from mid-2013 to 2015.

As investors are now looking to end-calendar year 2015 (CY15) for longer term prospects for the oil and gas sector, we have introduced our FY15 net profit estimate of RM171.0 million, which features: (i) full-year utilisation of E3, MOPU, FPSO and first jack-up rig; and (ii) half-year contribution of the second jack-up rig.

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Our roll forward target price based on 16 times CY15 EPS is raised to RM2.53 (from RM1.63). Post the private placement, our target price is likely to be diluted by about 8% to RM2.32. — Kenanga Research, Feb 17

This article first appeared in The Edge Financial Daily, on February 18, 2014.