Stock Name: PERDANA
Company Name: PERDANA PETROLEUM BERHAD
Oil and gas sector
Maintain overweight: Investments are barrelling through for the oil & gas (O&G) sector, which has grabbed 52% of the total committed investments for the Economic Transformation Programme (ETP). The 12 ETP O&G projects are expected to contribute a staggering RM64 billion worth of gross national income in 2020. Marginal fields and risk-sharing contracts (RSC) give local service providers a shot at becoming developers and producers, but are the big test for the sector. The development of a regional storage and trading hub provides opportunities for downstream players. The ETP development plans keep the prospects bright and will lead to sustainable earnings for the players, supporting our projection of a high-octane three-year earnings per share compounded annual growth rate of 57.6%. We remain 'overweight' on the sector and upgrade Perdana Petroleum Bhd from 'underperform' to 'trading buy'. Our new favourites are Petronas Dagangan Bhd (PDB; target price raised from RM18.50 to RM21.60) and Perisai Petroleum Teknologi Bhd.
It is full speed ahead at Berantai as the contractors are racing to produce first gas by year-end. All eyes are on Berantai and the three-way consortium because the field is expected to set the benchmark for future RSCs, a new upstream licensing system introduced by Petroliam Nasional Bhd (Petronas). In our view, the RSC framework actually offers much greater incentive than the standard terms of a production-sharing contract (PSC).
Construction of the seven-year, RM5 billion Pengerang terminal in Johor has started. South Johor could have a total terminal capacity of 10 million cu m within the next seven years and could develop into a large petroleum, petrochemical and liquefied natural gas trading hub. Though not part of the ETP, the US$20 billion (RM60 billion) refinery and petrochemical integrated development (Rapid) project adds to the excitement in south Johor.
Over the past year, the O&G sector's market capitalisation has surged from RM30 billion to RM60 billion, fuelled primarily by the emergence of bigger caps and active news flow on the ETP, mergers and acquisitions and new contracts. With the exception of marine support providers Perdana and Alam Maritim Resources Bhd, all companies in our O&G portfolio are expected to post record net profit every year in FY11 to FY13. Reflecting improved prospects, our O&G portfolio has outperformed the FBM KLCI by 20% year-to-date, lifted primarily by PDB.
Its share price has enjoyed a re-rating, thanks to a record FY11 ended March performance, the management's improved investor relations and the anticipation of more bumper dividends ahead of the end-2013 deadline for utilisation of tax credits. Nonetheless, we still project substantial share price upside to this big cap.
Small-cap Perisai stands out for its attractive valuations and tremendous share price upside. Its FY12/FY13 price-earnings ratios are undemanding at below eight times, making Perisai the cheapest stock in our O&G portfolio. Our target price of RM1.60 implies share price upside of 106%, which is the highest in the sector.
The sharp fall in Perdana's share price presents a trading opportunity. Since we downgraded the stock from 'trading buy' to 'underperform' on Jan 19, 2011, the share price has plunged 28%, underperforming the FBM KLCI by 27%. After seven straight quarters of losses, signs are pointing to a potential turnaround in 2H11. ' CIMB Research, July 20
This article appeared in The Edge Financial Daily, July 21, 2011.
Company Name: PERDANA PETROLEUM BERHAD
| Research House: CIMB | Price Call: TRADING BUY | Target Price: 0.92 |
Oil and gas sector
Maintain overweight: Investments are barrelling through for the oil & gas (O&G) sector, which has grabbed 52% of the total committed investments for the Economic Transformation Programme (ETP). The 12 ETP O&G projects are expected to contribute a staggering RM64 billion worth of gross national income in 2020. Marginal fields and risk-sharing contracts (RSC) give local service providers a shot at becoming developers and producers, but are the big test for the sector. The development of a regional storage and trading hub provides opportunities for downstream players. The ETP development plans keep the prospects bright and will lead to sustainable earnings for the players, supporting our projection of a high-octane three-year earnings per share compounded annual growth rate of 57.6%. We remain 'overweight' on the sector and upgrade Perdana Petroleum Bhd from 'underperform' to 'trading buy'. Our new favourites are Petronas Dagangan Bhd (PDB; target price raised from RM18.50 to RM21.60) and Perisai Petroleum Teknologi Bhd.
It is full speed ahead at Berantai as the contractors are racing to produce first gas by year-end. All eyes are on Berantai and the three-way consortium because the field is expected to set the benchmark for future RSCs, a new upstream licensing system introduced by Petroliam Nasional Bhd (Petronas). In our view, the RSC framework actually offers much greater incentive than the standard terms of a production-sharing contract (PSC).
Construction of the seven-year, RM5 billion Pengerang terminal in Johor has started. South Johor could have a total terminal capacity of 10 million cu m within the next seven years and could develop into a large petroleum, petrochemical and liquefied natural gas trading hub. Though not part of the ETP, the US$20 billion (RM60 billion) refinery and petrochemical integrated development (Rapid) project adds to the excitement in south Johor.
Over the past year, the O&G sector's market capitalisation has surged from RM30 billion to RM60 billion, fuelled primarily by the emergence of bigger caps and active news flow on the ETP, mergers and acquisitions and new contracts. With the exception of marine support providers Perdana and Alam Maritim Resources Bhd, all companies in our O&G portfolio are expected to post record net profit every year in FY11 to FY13. Reflecting improved prospects, our O&G portfolio has outperformed the FBM KLCI by 20% year-to-date, lifted primarily by PDB.
Its share price has enjoyed a re-rating, thanks to a record FY11 ended March performance, the management's improved investor relations and the anticipation of more bumper dividends ahead of the end-2013 deadline for utilisation of tax credits. Nonetheless, we still project substantial share price upside to this big cap.
Small-cap Perisai stands out for its attractive valuations and tremendous share price upside. Its FY12/FY13 price-earnings ratios are undemanding at below eight times, making Perisai the cheapest stock in our O&G portfolio. Our target price of RM1.60 implies share price upside of 106%, which is the highest in the sector.
The sharp fall in Perdana's share price presents a trading opportunity. Since we downgraded the stock from 'trading buy' to 'underperform' on Jan 19, 2011, the share price has plunged 28%, underperforming the FBM KLCI by 27%. After seven straight quarters of losses, signs are pointing to a potential turnaround in 2H11. ' CIMB Research, July 20
This article appeared in The Edge Financial Daily, July 21, 2011.
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