PERDANA (FV RM0.90 - BUY) FY11 Results Review: Stung by Vessel Impairment

Stock Name: PERDANA
Company Name: PERDANA PETROLEUM BERHAD

Research House: OSK

Price Call: BUY

Target Price: 0.90

Perdana's FY11 results were scuttled by  a massiveimpairment  charge  of RM39.3m for its old vessels and lowervessel utilization. We believe the objective of this huge impairment is toclean up its books  and convinceinvestors like Dayang to take up a higher equity stake. We continue to view Perdana  as an attractive andripe takeover target. Maintain Buy.

Behind expectations.Perdana's FY11 results were below consensus and our expectations, mainly due tothe huge impairment charge of RM39.3m for its old vessels in 4QFY11. Its 4QFY11revenue of RM56.2m was marginally lower by 5.1% q-o-q, largely attributed tothe  lower vessel utilization on the backof  the monsoon season  and cancellationof some vessel leases. Both the impairment charge  and lower  vessel utilization were the key factorsbehind Perdana's massive 4QFY11 net loss of RM48.6m.

Cleaner books to  attract higher equity participation byDayang. To date, we understand that Dayang already owns over 11% ofPerdana. However, until Perdana cleans up its books completely, we  will not be  surprised if Dayang  refrains from further increasing its equitystake in Perdana. This is because once the ownership crosses the 20% threshold,Dayang would need to incorporate its share of Perdana's  profit/loss into its books. Hence, we believeit would be crucial for Perdana to clean up its books thoroughly before it canconvince Dayang to  make further  investments. In our view, Perdana have donemost of the spring cleaning in 4QFY11 since it needs Dayang to fend off anytakeover attempt by unfriendly parties.

Maintain Buy.  Our fair value for Perdana remains unchangedat RM0.90 based on an existing PER of 12x FY12 EPS. We believe the worst isover for Perdana and FY11 was a 'wash out' year for the company. Going forwardto 2012, we are seeing higher take-up rates for its brownfield vessels, especiallywhen it bids for new jobs  in concertwith Dayang which is already an established player in the industry. Finally, asfor its AHTS, we believe demand would start to recover in 2H12,  thanksto the  commencement of  more marginal oilfields and the start ofGemusut Kakap deepwater field from 2013 onwards.

Source: OSK188