Petra Perdana BUY
Price target RM6.80
Share price at 28 Feb RM4.12
Investment summary
Normalized FY07 earnings were in-line with HLG/ market estimates. Strong +65% yoy earnings growth re-affirm our BUY rating on the stock. We like Petra Perdana because: (1) fleet of high brake horsepower vessels offers greater leverage to deepwater asset play (2) delivery of 17 new vessels from now till 2010 will bring down average age of vessels and increase utilization (3) expanding vessel operations into new markets within Southeast Asia and Australia. We remain positive on O&G vessel owner/operators sector: (1) charter rates continue to remain strong with new-builds lagging behind replacement market (2) the number of Malaysian flagged vessels is way below Petronas domestic demand
Bargain-hunting
FY07 earnings rose +65%, vs. –25% share price decline since Nov07. The share price/fundamental divergence is an opportunity to accumulate: (1) positive job-flow/charter rates prospects (2) higher EPS leverage to changes in charter rates due to current skew towards short-term contracts.
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Tuesday, 4 March 2008
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