Perisai Petroleum Teknologi - Private Placement Completed

News    PERISAI has completed its 10% private placement exercise and is looking to list the 85.1m shares today. 

 Post the listing, Perisai’s share base will increase to 936.9m (from 851.8m).

Comments   Priced at RM1.03/share, the placement has raised cash proceeds of around RM87.7m. 

 The private placement was initiated to raise funds for: 1) the repayment of borrowings; and 2) to purchase a second rig. Hence, we will not be surprised if such an announcement ensues later. 

 Recall that Perisai has an option (expiring in Feb-13) for the purchase of another rig at a USD210m price tag from PPL Shipyard Pte. Ltd. The expected delivery of the second rig is estimated to be by Apr-2015.

 The first rig meanwhile is due for delivery in July-2014.  The private placement will result in interest savings of c.RM2.9m. However, it would lead to EPS dilutions of around 6.0% and 6.7% for FY13E-14E.

 That said, we believe the dilutions from the private placement above will not significantly impact the stock as investors would be looking towards the finalisation of its impending asset swap (50% of SJR Marine for 51% of FPSO Lewek Arunothai) which is targeted for completion by mid-2013 to 3QFY13.

Outlook   Its 4Q12 result is tentatively expected to be released on the 7^th of Feb. We expect no major surprises with FY12 net profit achieving our RM93.2m forecasts given there has been no major changes to the company’s asset fleet to-date.

 The asset swap will give Perisai an exposure to the production leg of the oil and gas value chain, which should boast its long-term earnings.

 A further growth by mid-2015 to Perisai’s earnings, assuming the option for a second rig is exercised soon.

 The company is looking to diversify its earnings towards the drilling and production segments.

Forecast   We have increased our FY13-14E net profit forecasts by 3.2% and 2.7% respectively, to account for the interest savings. However, the EPS numbers for the two years would be diluted by 6.0% and 6.7%, respectively, inline with the larger share base.

Rating  Maintain OUTPERFORM

Valuation    The dilution above has resulted in our target price being reduced to RM1.39 (from RM1.48 previously) based on an unchanged 13x target PER on CY13 EPS.

Risks   1) a downturn in the oil and gas sector that will delay contract flows; 2) failure to replenish contracts, which will significantly affect its earnings growth; and  3) failure to achieve the expected margins on its projects.

Source: Kenanga