HLG: Petra Perdana - H108 below forecast; Cut EPS by 10% (25 August 2008)

Petra Perdana BUY


Price target RM5.00



Share price at 22 Aug RM3.54



Investment summary
Annualised H108 net profit was 29-33% below HLG/consensus full-year forecast due to delay in new vessel delivery. We cut our FY08 EPS forecast by 10% and lower our price target to RM5.00/share based on sum-of-the-parts (SOTP). We maintain our BUY rating on Petra Perdana because: (1) valuation at 9x FY09 is 20-30% discount to its peers; (2) aggressive vessel deliveries over the next two years will support our 14% EPS CAGR over FY07-10E; (3) successful bid for the RM1.5-2bn job from Shell will re-rate the share price.

We are positive on the oil and gas support vessels segment: (1) recent award of multi-year charter contracts by Petronas re-affirm our view that charter rates will hold for the next 3-4 years; (2) vessel supply-demand remains tight given that shipbuilding yards are filled with orders up to 2011/12.



Delay in vessel delivery

We cut our FY08 EPS forecast by 10% due to later than expected delivery of new vessels. However, we think the next 6-12 months is an exciting period for the stock due to its steady stream of vessel delivery. Key surprise could come from a successful bid for the brown field contract from Shell.