Results in line; maintain BUY, raising TP. Perdana’s 1Q13 net profit was 23% of our and 20% of consensus full-year estimates respectively. Perdana offers investors a simple yet robust business model and cheaper exposure to upside from major shareholder Dayang’s highly anticipated Pan Malaysia Hook-up, Construction and Commissioning (HUCC) contract wins. We retain our BUY call and raise our TP to MYR2.00 (+19%) on a higher target FY14 PER of 12x (10x previously), implying an FY14 PBV of 1.7x, still below its 8-year mean PBV of 1.8x.

Results tracked expectations. Perdana reported a 1Q13 net profit of MYR11.1m vs MYR11.6m in 4Q12 (-4.3% QoQ), as vessel utilisation dipped from 85% (4Q12) to 74% due to the onset of the seasonal monsoon in February-March. Revenue fell 12% QoQ to MYR56.8m on the lower utilisation, as well as the termination of Petra Excelsior’s sale and leaseback arrangement in January. Perdana also bore c.MYR2m- 3m in maintenance costs for its old vessels during the quarter.

Maintain earnings forecasts. We expect Perdana to deliver a core net profit of MYR47.8m in FY13 (+112% YoY). Seven of its 13 OSVs are on multi-year charters, anchoring FY13 earnings. Net profit should grow 71% in FY14 as four new work barges come progressively onstream over the next four quarters, destined, we believe, for Dayang’s use. Perdana will also enjoy cost savings of c.MYR8m-10m as seven of its older vessels will be disposed of by 26 Jun 2013.

More newsflow on the horizon; raising target price. Dayang is bidding for the Pan Malaysia HUCC contracts, reportedly worth MYR10b over five years. Perdana will capitalise on this by supplying work barges to Dayang (five units are available). We raise our TP to MYR2.00 as we now peg the stock to an FY14 PER of 12x (previously 10x) on account of: (i) Perdana’s simple yet robust earnings profile, (ii) discounted valuations to major shareholder Dayang’s 14.4x consensus PER and a simultaneous re-rating as Dayang announces contract wins, and (iii) ample room to grow its fleet (and earnings) as FY13 net gearing is anticipated to remain under 0.7x.

Source: Maybank Research - 21 May 2013