Perisai Petroleum Tech - More To Come?

INVESTMENT MERIT

• Stable earnings with bareboat charters.  All of Perisai’s contracts are on bareboat charter, which implies that its earnings risk is mitigated. 

• The Ezra link.  Singapore-listed Ezra is a major shareholder in Perisai with c.16% stake. It is the holding company of Emas Offshore, the 49% JV partner in Intan Offshore. We do not rule out further collaborations given its previous involvements. Perisai may be participating in an FPSO project for the Kamelia field with Emas Offshore’s FPSO arm given the local content requirement for the project in Malaysian waters. 

• More assets = further earnings growth.  FY13 earnings will be boosted if Perisai manages to secure the Kamelia FPSO project with EOC Ltd; its FY14 net profit will see another jump when Perisai accepts delivery of its first jackup rig (expected by mid-14). It has an option (expires by Feb-13) to buy another jack-up rig for USD210m, assuming a similar construction tenure to the first jack-up rig, which will help to push up its FY15 earnings.

• Conservative consensus forecast.  The consensus has forecast a FY13 net profit of RM91.7m, implying an  EPS of 11 sen. We believe the forecast is conservative given that is even lower than the annualised Perisai’s 1HFY12 earnings of RM93.4m. The potential earnings catalyst are 1) the transfer of Intan Offshore’s assets (OSVs) to a Labuan tax structure, and 2) an FPSO win by year-end.

• Decent upside. Ascribing a PER target of 11x (1x premium to Alam Maritim (10x CY13) due to its better earnings visibility), this will  imply a base case fair value of RM1.18, which still implies an upside of around 11.7%.

SWOT ANALYSIS

• Strength:  1) Bareboat charters imply lower earnings risk; and 2) niche asset base mitigates order replenishment risks. 

• Weaknesses:  High net gearing ratio (1x) implies further fund-raising activities upon new acquisitions. 

• Opportunities:  Expansion into the FPSO and jack-up rig market may lead to earnings improvement.

• Threats: Lower-than-expected yields from future jack-up rig ventures. 

TECHNICALS

• Resistance: RM1.10 (R1), RM1.13 (R2)

• Support: RM1.04 (S1), RM0.95 (S2)

• Comments: The recent surge in the share price has placed the  Stochastics and RSI in overbought territory, and hence we expect some degrees of consolidation in the near term. That said, traders should look to buy on weakness given the overall bullish technical picture.

BUSINESS OVERVIEW

Perisai Petroleum Tecknologi (“Perisai”) is a Malaysian Oil & Gas offshore service provider, which was listed in 2004. In 2010, it underwent a business restructuring that resulted in some divestments of  its assets and core businesses. The company then refocused on vessel chartering business. At this juncture, Singapore-based oil and gas services player, Ezra is a majority shareholder while the management is headed by the likes of En. Zainol Izzet, Sapuracrest Bhd’s previous CEO.

BUSINESS SEGMENTS

• Offshore Support Vessels (OSVs).  Vessels are jointly–owned (51%) with Emas Offshore, a subsidiary of Ezra under Intan Offshore. The fleet consists of 2 AHTs, 3 AHTS and 3 crewboats and has an average age of 6 years. All vessels are on bare boat charter to Ezra.

• Offshore Construction. The main underlying asset is Enterprise 3 (E3), a Derrick Pipelay Barge. Currently, E3 is chartered on a bareboat basis to TL Offshore Sdn Bhd, a subsidiary of SapuraKencana Petroleum. 

• Production.  The main underlying asset is the Rubicone, a Malaysian flagged ABS Class Mobile Offshore Production Unit (MOPU). Rubicone is currently on bare-boat contract to Petronas for operations off the coast of Terengganu.

• Offshore Drilling.  Perisai signed a Rig Construction Contract with PPLShipyard to construct a jack-up drilling rig at a cost of USD208m. The expected delivery is in 1H2014. Perisai also has the option to construct an additional jack-up rig unit for USD210m. This option is yet to be exercised.

Source: Kenanga