PERISAI (0047) : Perisai Petroleum - Debt thing you do
Target RM0.63 (Stock Rating: ADD)
We learned from our communication with Perisai’s management today that the company is set to remain on the Securities Commission’s shariah compliance list in the May 2015 review after a successful conversion of US$170m of conventional loans into an Islamic facility in the final week of FY14. We continue to value the stock at 10.5x CY16 P/E, still at a 30% discount to the oil & gas big caps. We maintain our Add call, with the deployment of Rubicone and E3 as potential re-rating catalysts.
What Happened
In the week of 29 Dec 2014, management finalised the conversion of US$170m of conventional loans for jack-up PP101 into an Islamic facility with no change in terms and rates and at a minimum paperwork charge. With this development, Perisai is set to remain on the SC’s shariah compliance list in the May 2015 review.
What We Think
We are encouraged that management took the initiative to meet the SC’s requirement for shariah compliance. As at 30 Sep 2014, Perisai’s total borrowings amounted to RM1.1bn, of which most were conventional, while total assets were worth RM2.4bn. The company’s total conventional borrowings over total assets, therefore, stood at 47%, higher than the 33% threshold set by the SC. After the conversion, Perisai’s total conventional borrowings over total assets should be reduced to an estimated 21% by 31 Dec 2014, allowing the company to keep its shariah-compliant status come May. Another industry player, SapuraKencana, is in the midst of converting an estimated RM8bn out of RM15.3bn in borrowings (as at 31 Jul 2014), of which all are conventional, into Islamic instruments. SapuraKencana’s total conventional borrowings over total assets should be reduced from 46% as at 31 Jan 2014 (last audited accounts) to an estimated 23% by 31 Jan 2015. This will allow SapuraKencana, which has a 31 Jan financial year-end, to be included in the May list after its removal in the Nov 2014 review.
What You Should Do
We advise investors to accumulate Perisai shares. In our 30 Dec 2014 sector report, we conservatively removed two idle assets, namely mobile offshore production unit Rubicone and pipelay barge E3, from our forecasts. Should management secure contracts for these assets, the swing in earnings would be substantial.
Source: CIMB Daybreak - 09 January 2015
Target RM0.63 (Stock Rating: ADD)
We learned from our communication with Perisai’s management today that the company is set to remain on the Securities Commission’s shariah compliance list in the May 2015 review after a successful conversion of US$170m of conventional loans into an Islamic facility in the final week of FY14. We continue to value the stock at 10.5x CY16 P/E, still at a 30% discount to the oil & gas big caps. We maintain our Add call, with the deployment of Rubicone and E3 as potential re-rating catalysts.
What Happened
In the week of 29 Dec 2014, management finalised the conversion of US$170m of conventional loans for jack-up PP101 into an Islamic facility with no change in terms and rates and at a minimum paperwork charge. With this development, Perisai is set to remain on the SC’s shariah compliance list in the May 2015 review.
What We Think
We are encouraged that management took the initiative to meet the SC’s requirement for shariah compliance. As at 30 Sep 2014, Perisai’s total borrowings amounted to RM1.1bn, of which most were conventional, while total assets were worth RM2.4bn. The company’s total conventional borrowings over total assets, therefore, stood at 47%, higher than the 33% threshold set by the SC. After the conversion, Perisai’s total conventional borrowings over total assets should be reduced to an estimated 21% by 31 Dec 2014, allowing the company to keep its shariah-compliant status come May. Another industry player, SapuraKencana, is in the midst of converting an estimated RM8bn out of RM15.3bn in borrowings (as at 31 Jul 2014), of which all are conventional, into Islamic instruments. SapuraKencana’s total conventional borrowings over total assets should be reduced from 46% as at 31 Jan 2014 (last audited accounts) to an estimated 23% by 31 Jan 2015. This will allow SapuraKencana, which has a 31 Jan financial year-end, to be included in the May list after its removal in the Nov 2014 review.
What You Should Do
We advise investors to accumulate Perisai shares. In our 30 Dec 2014 sector report, we conservatively removed two idle assets, namely mobile offshore production unit Rubicone and pipelay barge E3, from our forecasts. Should management secure contracts for these assets, the swing in earnings would be substantial.
Source: CIMB Daybreak - 09 January 2015
