News

In addition to the proposed 10% placement and 50% sale of Enterprise 3 (E3) pipe laying barge and acquisition of the FPSO, Perisai announced that it has proposed to enter into a put call agreement with EOC Limited. 

Under the agreement, EOC has the right to buy the remaining 50% stake in E3 for USD37m. Perisai also has the right to put (force EOC to buy) the remaining 50% for USD37. 

The consideration price is equivalent to the sale of the initial 50%. The put call agreement is valid for 2 years.

Comment

We are positive on the disposal which will lower debt as the jackup rig is scheduled for delivery in mid 2014 during a period whereby we believe would be a robust market for drilling. Moreover, impact on earnings is likely to be positive. 

The put call option will help to reduce cash outflow when the (80% payment of USD208m) rig is delivered in mid 2014. 

Assuming rig utilisation is 80% and the daily charter rate is USD160k, top line contribution from the rig is RM140m while contribution from the pipelay barges is ONLY RM67m. Thus assuming that both the rig and pipelay vessel have similar margins earnings could increase several fold. 

All and all we are positive on the recent proposals as the company is sensible in managing gearing while at the same time ensuring that earnings will be enhanced.

Risks

Political risk, Execution risk.

Forecasts

Maintained for now, pending details of the recent deals.

Rating

BUY 

• Positives –  Clarity in earnings.  Clear and proven growth strategy and business model.  Growth is not dependent on securing O&G talent. 
• Negatives –  Growth is dependent on domestic conditions

Valuation

We maintain our TP of RM1.55 and pending details of recent deals on an unchanged 16x FY/13 EPS of 9.7 sen/share. We give a higher than average (of 14x) small cap O&G P/E because of Perisai’s earnings clarity and growth.

Source: Hong Leong Investment Bank Research - 06 Dec 2012