Stock Name: PENERGY
Company Name: PETRA ENERGY BHD
Research House: OSK
Petra Energy Bhd
(May 26, RM1.18)
Upgrade to neutral from sell, with higher target price of RM1.15 (from 85 sen): Petra Energy's 1QFY10 results were within consensus but above our expectations, making up 29% and 48% of the FY10 forecasts respectively. Surprisingly, Petra Energy saw more business activities in brownfield maintenance and engineering services when the O&G industry had been generally quiet during the quarter as there were minimal new jobs.
Also, its net profit improved significantly to RM8.1 million in the current quarter versus a loss in 4QFY09, during which it was hit by: 1) late delivery charges from the boiler business amounting to RM4.9 million; 2) provisions for doubtful debts of RM2.2 million from the design and fabrication sector; 3) mobilisation costs of RM4.8 million for three new vessels (Petra Endeavour, Petra Orbit and Petra Galaxy) to be used for the Shell contract, and 4) dry docking expenses of RM1 million.
Finally, year-on-year, the 1QFY10 net profit was only slightly higher by 9.4% although revenue jumped significantly by 42.9%, mainly due to the difference in product and service mix during the quarters, which gave rise to variations in margin.
We have also upgraded our FY10-FY11 earnings by 36%-58% in line with the better results and expectation of better performance in the coming quarters. Nevertheless, we have lowered our PE (price-to-earnings) valuation for Petra Energy to eight times (previously 10 times) until we see more consistent quarterly results as well as new brownfield services contracts being awarded to the company given the stifr competition.
Our target price on the stock has now been upgraded to RM1.15 as we roll forward to FY11 earnings. Also, note that its competitors like Dayang and Kencana are getting stronger by the day on purchases of new vessels to expand their brownfield services, especially in the hook-up and commissioning area. ' OSK Research, May 26
This article appeared in The Edge Financial Daily, May 27, 2010.
Company Name: PETRA ENERGY BHD
Research House: OSK
Petra Energy Bhd
(May 26, RM1.18)
Upgrade to neutral from sell, with higher target price of RM1.15 (from 85 sen): Petra Energy's 1QFY10 results were within consensus but above our expectations, making up 29% and 48% of the FY10 forecasts respectively. Surprisingly, Petra Energy saw more business activities in brownfield maintenance and engineering services when the O&G industry had been generally quiet during the quarter as there were minimal new jobs.
Also, its net profit improved significantly to RM8.1 million in the current quarter versus a loss in 4QFY09, during which it was hit by: 1) late delivery charges from the boiler business amounting to RM4.9 million; 2) provisions for doubtful debts of RM2.2 million from the design and fabrication sector; 3) mobilisation costs of RM4.8 million for three new vessels (Petra Endeavour, Petra Orbit and Petra Galaxy) to be used for the Shell contract, and 4) dry docking expenses of RM1 million.
Finally, year-on-year, the 1QFY10 net profit was only slightly higher by 9.4% although revenue jumped significantly by 42.9%, mainly due to the difference in product and service mix during the quarters, which gave rise to variations in margin.
We have also upgraded our FY10-FY11 earnings by 36%-58% in line with the better results and expectation of better performance in the coming quarters. Nevertheless, we have lowered our PE (price-to-earnings) valuation for Petra Energy to eight times (previously 10 times) until we see more consistent quarterly results as well as new brownfield services contracts being awarded to the company given the stifr competition.
Our target price on the stock has now been upgraded to RM1.15 as we roll forward to FY11 earnings. Also, note that its competitors like Dayang and Kencana are getting stronger by the day on purchases of new vessels to expand their brownfield services, especially in the hook-up and commissioning area. ' OSK Research, May 26
This article appeared in The Edge Financial Daily, May 27, 2010.
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