Thursday 28 Mar 2024
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Perdana Petroleum Bhd
(May 13, RM1.50)
Maintain add with unchanged target price (TP) of RM1.61:
As highlighted in our March 26 note, we think that a general offer (GO) for Perdana Petroleum shares by Dayang Enterprise Holdings Bhd is possible, more so following separate announcements by Perdana and Dayang on Wednesday on the trading suspension of their shares on Thursday.

We maintain our “add” call and TP on Perdana, although its share price has rallied by 25% since we released our March 26 note, leaving just a 7% upside to our TP pending the release of details.

We continue to value the stock at 10.5 times calendar year 2016 (CY16) price-earnings ratio, still at a 30% discount to the oil and gas big caps. Perdana remains our top oil and gas smallcap pick.

Earlier on Wednesday, the company received a letter from its largest shareholder Dayang that it intends to enter “into a material corporate transaction involving Perdana”.

Dayang also announced that the trading of its shares were suspended on Thursday. We think that Dayang is set to launch a GO for Perdana shares it does not already own.

We highlighted this possibility in our March 26 note following Dayang’s aggressive buying of Perdana shares the week before. Currently, Dayang owns a 29.9% stake in Perdana.

To recap, Dayang became Perdana’s shareholder in December 2011 through a 10% private placement and has since increased its stake to the current level.

The synergies between the two companies are in the area of brownfield services, which require work barges and work boats. Perdana currently has five work barges and a work boat deployed to Dayang on long-term charters.

More than 70% of Perdana’s vessels are on long-term charters. The control of Perdana would give Dayang better access to Perdana’s young fleet of 19 vessels, of which 17 are in operation and two are due for delivery in financial year 2016.

The fleet’s average age is 4.8 years. Perdana has an order book of around RM1.1 billion up to financial year 2019 (FY19).

Perdana’s share price has rallied by 25% and outperformed the Kuala Lumpur Composite Index (KLCI) by 26% since we released our March 26 note.

The current share price of RM1.50 — the highest year-to-date — is just 7% shy of our RM1.61 target price, which we are maintaining for now pending the release of transaction details.

We advise shareholders to hang on to their shares. — CIMB Research, May 14

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This article first appeared in The Edge Financial Daily, on May 15, 2015.

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