Perdana Petroleum wins new job for barge

by **Cals** Thu 06 Mar 2014, 17:24

Business & Markets 2014

Written by Kenanga Research

Thursday, 06 March 2014 10:15

Perdana Petroleum Bhd
(March 5, RM1.96)
Maintain outperform with target price of RM2.47: Perdana Petroleum has won a letter of award from Ocean Pro Offshore Sdn Bhd for the charter of one accommodation barge. The firm duration of the contract is two years with an option for a one-year extension. The contract value for a two-year term is approximately RM52 million.

We are positive on this contract win as it illustrates the capability of Perdana Petroleum to secure contracts. We believe that it will utilise its Petra Enterprise for this contract given that it is the only accommodation barge on spot.

The daily charter rate (DCR) for the contract is RM71,200 which is within our RM67,500 and RM72,000 DCR assumption for the vessel for financial year 2014 ending Dec 31 (FY14).

Medium- to long-term prospects are stable on the back of Perdana Petroleum’s long-term contracts (it has 15 offshore service vehicles [OSV]). Currently, only two vessels (5,000bhp anchor handing tug supply vessels) are on spot charter and Perdana Petroleum is confident of securing recurring contracts for such vessels given the OSV upcycle.

Some of the risks to our call are: (i) lower than expected daily charter rates and utilisation rates; and (ii) sudden downturn in crude oil prices.

We have fine-tuned our charter rate assumptions for Petra Enterprise, but with only minimal changes (0.4% and -0.1% respectively) to FY14 estimates and FY15 net profit.

Our target price is RM2.47 based on an unchanged target price-earnings ratio of 15.5 times (in line with Perdana Petroleum’s +1.5 historical standard deviation forward level seen on top of its average mean in 2006 to 2008) on calendar year 2015 earnings per share of 15.3 sen. — Kenanga Research, March 5

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This article first appeared in The Edge Financial Daily, on March 06, 2014.