Perdana Petroleum - Within ours, above market’s

Period  4Q12/12M12

Actual vs. Expectations  Estimated 4Q12 core net profit of RM12.1m brought core CY12 net profit to RM24.6m. This was within our RM24.3m net profit forecast. However, it is slightly above consensus expectation’s of RM21.7m.

 Our estimated 4Q12 core net profit excludes an impairment loss on non-current asset classified as held for sale amounting to RM27.7m. The impairment is the net loss recognised on the potential sale of seven old vessels that Perdana had been looking to pare off for some time.

Dividends  No dividends were declared as expected.

Key Results Highlights  QoQ, core net profit was down by 21.6% mainly due to the lower vessel utilisation in the current quarter (the utilisation has decreased to 85% from 92% in 3QFY12). This is expected given that vessel players are typically hit in the 4Q, which is the monsoon season.

 YoY, Perdana posted a complete turnaround as its vessel utilisation improved in tandem with the encouraging industry outlook for vessel players and its cost rationalisation exercise.

Outlook  To recap, in our initiation piece, we highlighted that a key risk for Perdana was its inability to sell its older vessels as it would mean that there were unnecessary costs incurred for non-operating vessels. As such, we are pleasantly surprised that the company has managed to do so swiftly.

 A balanced offshore vessel mix will ensure that it has sufficient reach to the different segments of the O&G value chain. Its relatively young asset fleet mitigates the risks of contract replenishment post the completion of its long-term contracts.

 Meanwhile, its linkage to Dayang will provide Perdana with some access to turnkey projects.

Changes To Forecasts   Given that the results were within expectations, we are maintaining our FY13-14 net profit estimates.

Rating   Maintain OUTPERFORM

Valuation  Our target price of RM1.62 is based on a targeted PER of 14.0x (in line with its 2-year historical average forward PER of 14.0x seen in 2007-2008) on its CY13 EPS of 11.4 sen.

Risks  1) A downturn in the oil and gas sector could hamper future vessel utilisation; 2) lower than expected capacity utilisation charter rates; and 3) the inability of Dayang to secure a sizeable portion of the Pan Malaysia contract.

Source: Kenanga