Perdana Petroleum’s earnings were in line with our and consensus estimates. The company finally turned in a profit in 2QFY12 versus a net loss in the preceding quarter, primarily driven by an improvement in vessel utilisation and charter rates. Although its YTD earnings remained in the red, we expect the company to return to the black in 2HFY12 as we anticipate more jobs to come from Petronas and its PSC contractors as well as from major shareholder Dayang. Maintain BUY, with a revised fair value of RM1.30, as we roll over our valuations to FY13 earnings.
On track to return to the black. Perdana Petroleum’s earnings returned to the black in 2QFY12 by posting a core net profit of RM6.5m compared to a loss of RM9.9m in 1QFY12. The turnaround was primarily driven by improvements in vessel utilisation and charter rates, which led to higher operating profit from the former. In the preceding quarter, the prolonged monsoon season had resulted in a drop in vessels utilisation. Nonetheless, the group still recorded a net loss of RM4.5m for 1HFY12, but this was 55.0% lower y-o-y. Revenue was also down 14.0% y-o-y due to the reduction in its fleet from 16 to 14 vessels, as well as the weaker 1QFY12 due to the monsoon season.
The going to get better. We maintain our view that the worst is over for the company and expect it to turn around in 2HFY12 as O&G activities in Malaysia pick up. Also, we expect a bigger flow of new projects from Dayang when the latter secures more brownfield services tenders, as most of the existing projects are due for renewal this year. All of Perdana Petroleum’s newly-built assets are already in place and the group will be seeking longer term charters for its fleet of vessels.
Maintain BUY. We are maintaining our BUY recommendation on Perdana Petroleum, with our FV nudged up to RM1.30 (previously RM0.90), based on the existing PE of 12x FY13 EPS (previously 12x FY12 EPS). Note that our FV is derived from the company’s enlarged share capital of 556.4m shares, assuming full conversion of its existing warrants. We expect the share price of Perdana Petroleum to rebound now that it has returned to the black.
Source: OSK
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