Petra Perdana Berhad : Dragged Down By Petra Energy - 01/03/2010

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1 March 2010

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Table 1 : Investment Statistics (PETRA; Code: 7108) Bloomberg : PETR MK

Net Core EPS Net

FY E Turnover profit EPS EPS# Growth# PER# C.EPS* P/ NTA gearing ROE NDY

Dec (RMm) (RMm) (sen) (sen) (% ) (x) (sen) (x) (x) (%) (%)

2009 605.7 29.3 9.8 9.8 (53.1) 13.8 11.0 0.8 0.1 6.0 1.1

2010f 305.9 23.8 8.0 8.0 (18.5) 17.0 19.0 0.8 (0.2) 4.7 1.1

2011f 369.1 50.9 17.1 17.1 113.5 8.0 25.0 0.7 (0.2) 9.4 1.1

2012f 392.4 75.0 25.2 25.2 47.3 5.4 - 0.6 (0.2) 12.5 1.1

Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC # Excl. EI * Consensus Based On IBES Estimates

♦ 4QFY09 results largely in line. FY09 net profit was in line with our

expectation but below market consensus, accounting for 95% and 81% of

our and market full-year estimates respectively. 4QFY09 marine revenue

fell 26% yoy mainly due to: 1) declining charter rates (with average

charter rates for the 10-12k HP AHTS having slipped 35% yoy to around

US$1.70-1.80); and 2) lower utilisation rates (4Q utilisation rates of 60%

vs. 70% in 4QFY08). However, on a qoq basis, 4Q revenue increased 9%

on 4Q utilisation rates of 60% vs. 50% in 3QFY09. Higher qoq for marine

margin due to higher utilisation rates as well as higher operating cost in

3QFY09 arising from mobilisation of newly-delivered Petra Ranger.

♦ Petra Energy. However, Petra Energy’s FY09 core net profit of RM15.4m

was below our expectation, accounted for 43% of our full-year forecast.The variance was largely due to lower-than-expected earnings contribution

from RM1.1bn 4-year Shell Sarawak/Sabah contract arising from delayed

delivery of three new vessels (i.e. Petra Orbit, Petra Endeavour and Petra

Galaxy) as well as higher expenses for dry docking of vessels.

♦ Medium-term outlook has deteriorated. We have previously

highlighted that although 50% of the vessels demand arising from the

replacement market is holding up, demand stemming from newer

requirement appears to remain weak (despite crude oil price stabilising at

around US$70/barrel). Futhermore, we believe lease charges and related

costs would likely impact FY10 earnings given mobilisation costs for the

eight vessels (with six vessels from China shipyard) as well as lease

charges arising from potential delay in securing contracts for these vessels.

♦ Forecasts. We have cut our FY10-11 core EPS forecasts by 3.6% and

3.3% respectively after adjusting factoring in lower contribution from

brownfield services. We have introduced our FY12/12 earnings projection.

♦ Investment case. Following our earnings revision, our fair value is

trimmed slightly to RM1.00/share (from RM1.02/share previously), which

is based on unchanged 13x FY10 PER. We highlight that we have forecast

significant earnings recovery in FY11, but in the absence of better numbers

from Petra Energy, we are still looking at a core net profit that is lower

than that of FY08. Therefore, investors may need to be holders at least for

another two years before we see earnings return to previous levels. Hence,

we reiterate our Underperform call on the stock for now.

Corpora te H igh l ights

Resu l t s No t e

Petra PerdanaDragged Down By Petra Energy

M

a l a y s i a

Share Price : RM1.35Fair Value : RM1.00

Recom : Underperform (Maintained)

RHBRI Vs. Consensus

Above

In Line

Below

Issued Capital (m shares) 297.6Market Cap(RMm) 401.8Daily Trading Vol (m shs) 1.3

52wk Price Range (RM) 1.20-3.14

Major Shareholders: (% )

Tengku Ibrahim Petra 24.4

Dato’ Henry Kho 7.2

FYE Dec FY09F FY10F FY11FEPS chg (%) (0.1) (3.6) (3.3)Var to Cons (%) (14.9) (58.6) (25.5)

PE Band Chart

Relative Performance To KLCI

Wong Chin Wai(603) 92802158

[email protected] read importan t disclosures at the end of this report.

M A R K

E T

D A T E L I N E

P P

7 7 6 7 / 0 9 / 2 0 1 0 ( 0 2 5 3 5 4 )

Petra Perdana

FBM KLCI

PER = 21x

PER = 16x

PER = 11x

PER = 6x

1 March 2010

RHB ResearchInstitute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M



1 March 2010



Table 2: Quarterly Review

FYE Dec (RMm) 4Q08 3Q09 4Q09QoQ(%)

YoY(%)

FY08 FY09 YoY (%) Comments

Marine68.8 46.4 50.7 9 (26) 219.5 227.9 4

Lower yoy due to: 1) declining charter

rates (with average charter rates for the

10-12k HP AHTS having slipped 35% yoy

to around US$1.70-1.80); and 2) 4Q

utilisation rates of 60% vs. 70% in

4QFY08). Higher qoq due to higher

utilisation rate given 3QFY09 utilisation

rates of 50%

Petra Energy152.0 110.3 68.6 (38) (55) 474.7 377.6 (20)

Lower qoq and yoy due to lower

contribution from Shell Sarawak/Sabah

arising from delay in delivery of vessel.

Others0.2

Revenue220.9 156.7 119.4 (24) (46) 694.3 605.7 (13)

EBITDA35.1 15.8 24.6 56 (30) 171.9 130.3 (24)

Higher qoq for marine due to higher

utilisation rates as well as higher

operating cost in 3QFY09 arising from

mobilisation of newly-delivered Petra.

Margin (%)15.9% 10.0% 20.6% 24.8% 21.5% (13)

Depreciation(10.9) (11.8) (13.4) 13 23 (42.4) (49.0) 15

Stable depreciation.

Net interest(9.7) (6.8) (6.6) (3) (32) (32.7) (32.7) (0)

Net debt decreased to RM265m at end-

Dec 09 vs. RM409m at end-Sep 09.

Excep items22.5 - n.m (100) 22.5 - (100)

4Q08 included RM22.5m gain from the

disposal of IOS Andari 2.

Associates(0.7)

Marine PBT3.8 (9.5) 5.0 152 31 38.8 22.3 (43)

Higher qoq marine margin as 3QFY09

was affected by lower vessels utilisation

as four vessels (i.e. IOS Captain, IOS

Champion, IOS Victory and IOS Glory)

were idle, and higher operating cost

arising from mobilisation of Petra Ranger

in Jul 09.

Petra Energy

PBT

10.7 6.6 (0.3) (105) (103) 58.0 26.4 (54) Lower Petra Energy margin qoq due to

higher contribution from lower-margin

brownfield services as well as dry

docking of vessels

Total PBT37.0 (2.9) 4.7 (261) (87) 119.3 48.7 (59)

Tax(5.3) (5.2) (0.3) (94) (94) (14.9) (12.4) (17)

Eff. tax rate (%)36.5% -

179.9%

6.5% 12.5% 25.4% 103

Minorities(3.5) (0.9) (0.3) (65) (91) (16.9) (7.0) (58)

Lower qoq and yoy as Petra Energy is

now an associate

Net profit28.3 (8.9) 4.1 (145) (86) 87.7 29.3 (67)

Core net profit5.8 (8.9) 4.1 (145) (30) 62.4 29.3 (53)

Net cash/(debt)

(291) (409) (265) (35) (9)

Net gearing (x)0.5 0.7 0.5 (35) (12)

Source: Company, RHBRI



1 March 2010



Table 3. Sum-Of-Parts Fair Value Calculation

Fair Value

(RMm)

Marine (based on 13x FY10 PER) 245.7

Petra Energy (29.6% share of FV, based on 11.7x FY10 PER - 10% discount to peers) 52.0

Total 297.7

SOP fair value per share (RM) 1.00Share price (RM) 1.35

Upside (%) (26)

Source: RHBRI estimate

Table 4. Earnings Forecasts Table 5. Forecast Assumptio ns

FYE Dec (RMm) FY09 FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Marine 218.3 305.9 369.1 392.4 AHTS available fleet capacity (hp) 170,094 185,094 185,094

Engineering 564.0 - - - Avg capacity utilisation (%) 75.0 79.3 79.3

Revenue 605.7 305.9 369.1 392.4 Avg charter rate (US$/hp/day) 2.24 2.38 2.57

EBITDA 94.8 65.9 86.3 106.1 Source: Company data, RHBRI estimates

EBITDA margin (%) 15.7 21.5 23.4 27.0

Net interest expense (12.2) (10.1) (8.7) (5.6)

Depreciation (24.4) (36.5) (36.4) (37.5)

Excep items - - - -

Associate - PEnergy (0.7) 4.9 10.0 12.4

Pre-tax profit 48.7 24.2 51.2 75.4

Tax (12.4) (0.3) (0.3) (0.4)

Effective tax rate (%) 25.5 1.3 0.6 0.5

MI (7.0) - - -

Net profit 29.3 23.8 50.9 75.0

Core net profit 29.3 23.8 50.9 75.0

Growth (%) (53.1) (18.5) 113.5 47.3

Source: Company data, RHBRI estimates

IMP ORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. Theopinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ orbe contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to beconstrued as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in anymanner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated personsmay from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or

strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB



1 March 2010



Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equitysecurities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or otherservices from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflectinformation known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based

upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or moreover a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take onhigher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommendedsecurities, subject to the duties of confidentiality, will be made available upon request.

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Petra Perdana Berhad : Dragged Down By Petra Energy - 01/03/2010