PERISAI (0047) : Perisai Petroleum - Down but not out
Target RM2.20 (Stock Rating: ADD)
Our recent meeting with management revealed that Rubicone and E3 are unlikely to be put to work this year, given that the monsoon season has started in Southeast Asia. However, the uptrend in contributions from PP101 and Perisai Kamelia will soften the blow caused by the idleness of Rubicone and E3. We lower our FY14-15 EPS to reflect further downtime for Rubicone and E3 and now assume that they will only be mobilised in 2Q15. Despite a rollover, our target price falls as we now value the stock based on CY16 P/E of 14.8x (previously CY15 P/E of 16.4x) with unchanged 30% discount to the P/E of the oil & gas big caps. We maintain our Add recommendation, with the full deployment of the assets as the potential re-rating catalyst.
What Happened
At our recent meeting, management shared that mobile offshore production unit Rubicone and pipelay barge Enterprise 3 (E3) are only likely to start work again in 2Q15. The two assets have been unemployed since Oct 2013 after the completion of their respective contracts. Management is marketing Rubicone in Malaysia and Indonesia. Rubicone is currently docked at MMHE's Pasir Gudang yard, while E3 is at Johor Port. On a separate note, management has started negotiations with potential clients for jack-up Perisai Pacific 102 (PP102), which is scheduled for delivery in Apr/May 2015. PP103 is expected to join the fleet in Jun 2016.
What We Think
While we are disappointed with the continued immobility of Rubicone and E3, we are comforted that the earnings vacuum is mitigated by higher contributions from PP101 and FPSO Perisai Kamelia. PP101, which began drilling in Aug 2014, is already working at the third field. Perisai Kamelia, which started production in Nov 2013, will make its first full-year contribution this year. Given the strong demand for jack-ups in Southeast Asia as reflected by UMW-OG's high utilisation rate, Perisai's management should be able to secure a contract for PP102 before the asset is completed. We expect it to secure a minimum daily market rate of US$140,000-150,000 for a long-term contract. PP101 fetches US$144,292 per day for a firm period of three years.
What You Should Do
Look beyond the expected soft FY14 earnings performance caused by the extended downtime for Rubicone and E3. We anticipate that FY15 and FY16 earnings will be substantially stronger as all assets will be fully deployed then.
Source: CIMB Daybreak - 03 November 2014
Target RM2.20 (Stock Rating: ADD)
Our recent meeting with management revealed that Rubicone and E3 are unlikely to be put to work this year, given that the monsoon season has started in Southeast Asia. However, the uptrend in contributions from PP101 and Perisai Kamelia will soften the blow caused by the idleness of Rubicone and E3. We lower our FY14-15 EPS to reflect further downtime for Rubicone and E3 and now assume that they will only be mobilised in 2Q15. Despite a rollover, our target price falls as we now value the stock based on CY16 P/E of 14.8x (previously CY15 P/E of 16.4x) with unchanged 30% discount to the P/E of the oil & gas big caps. We maintain our Add recommendation, with the full deployment of the assets as the potential re-rating catalyst.
What Happened
At our recent meeting, management shared that mobile offshore production unit Rubicone and pipelay barge Enterprise 3 (E3) are only likely to start work again in 2Q15. The two assets have been unemployed since Oct 2013 after the completion of their respective contracts. Management is marketing Rubicone in Malaysia and Indonesia. Rubicone is currently docked at MMHE's Pasir Gudang yard, while E3 is at Johor Port. On a separate note, management has started negotiations with potential clients for jack-up Perisai Pacific 102 (PP102), which is scheduled for delivery in Apr/May 2015. PP103 is expected to join the fleet in Jun 2016.
What We Think
While we are disappointed with the continued immobility of Rubicone and E3, we are comforted that the earnings vacuum is mitigated by higher contributions from PP101 and FPSO Perisai Kamelia. PP101, which began drilling in Aug 2014, is already working at the third field. Perisai Kamelia, which started production in Nov 2013, will make its first full-year contribution this year. Given the strong demand for jack-ups in Southeast Asia as reflected by UMW-OG's high utilisation rate, Perisai's management should be able to secure a contract for PP102 before the asset is completed. We expect it to secure a minimum daily market rate of US$140,000-150,000 for a long-term contract. PP101 fetches US$144,292 per day for a firm period of three years.
What You Should Do
Look beyond the expected soft FY14 earnings performance caused by the extended downtime for Rubicone and E3. We anticipate that FY15 and FY16 earnings will be substantially stronger as all assets will be fully deployed then.
Source: CIMB Daybreak - 03 November 2014
