PP 7767/09/2010(025354)

26 August 2010
RHB Research
Corporate Highlights
Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su lts N ot e
26 August 2010
MARKET DATELINE

Petra Perdana Share Price

Fair Value
:
:
RM1.23
RM0.50
Troubles Continue Recom : Underperform
(Maintained)

Table 1 : Investment Statistics (PETRA; Code: 7108) Bloomberg: PETR MK

Net Core EPS Net
FYE Turnover profit EPS EPS# Growth# PER# C.EPS* P/NTA gearing ROE NDY
Dec (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009 605.7 30.1 10.1 10.1 (53.7) 12.1 - 0.6 0.5 5.4 1.2
2010f 222.2 (38.0) (11.6) (11.5) (213.4) (10.7) 10.0 0.8 0.6 (7.1) 1.2
2011f 286.6 17.2 5.3 5.3 (145.8) 23.4 18.0 0.8 0.6 3.4 1.2
2012f 321.1 37.1 11.3 11.3 115.7 10.8 19.0 0.7 0.6 6.9 1.2
Main Board Listing / Trustee Stock / Syariah-Approved Stock By The SC # Excl. EI * Consensus Based On IBES Estimates

♦ 2QFY10 results turn to losses. Despite having one of the lowest RHBRI Vs. Consensus
Above
forecasts for the company in the market, we were nevertheless still
In Line
surprised by the size of the operating loss in the 2Q. The operating loss
Below
was caused mainly by: 1) lease rental charges amounting to around
RM20.2m incurred for five off-balance sheet vessels which were not Issued Capital (m shares) 327.4
working during the quarter; 2) mobilisation cost of RM5.9m for five new Market Cap (RMm) 402.7
vessels that were delivered from May, including two 12k HP AHTS, two Daily Trading Vol (m shs) 1.1
workboats and one workbarge; and 3) higher repair and maintenance cost 52wk Price Range (RM) 1.05-2.72
Major Shareholders: (%)
for old vessels. There was also a fair value adjustment of RM8.7m under
Senior Management ~11.8
FRS139. In total, 10 out of 23 vessels in the fleet were not working,
Tengku Ibrahim Petra ~9.0
including six old and four new vessels. Lembaga Tabung Haji 9.2

♦ Forecasts cut. We have cut our FY10 EPS forecast significantly to factor in
Nam Cheong Dockyard
Permodalan Nasional Bhd
9.1
7.5
the 2Q loss. While we have assumed that the company will try to secure
more charters in the 2H to cover the vessel lease rental charges, we do not FYE Dec FY10F FY11F FY12F
expect enough improvement in offshore oil & gas activity in the 2H to EPS chg (%) (269.6) (56.9) (41.5)
result in a turnaround for the company this year. However, we have Var to Cons (%) (214.8) (70.8) (40.3)
assumed a pick up in offshore activity for the sector in 2011, as demand
Share Price Chart
begins to pick up after this period of economic slowdown. As such, we
expect Petra Perdana to turn profitable again in FY11, on the assumption
that blended charter rates improve by 10%, and vessel utilisation rates
rise to 69% (from an estimated 62% in FY10). Nevertheless, our overall
forecasts are still significantly lower than previously.

♦ Risks. While there is a chance that associate Petra Energy may win a
portion of Petronas Carigali’s brownfield maintenance contract, the poor
visibility for Petra Perdana’s marine earnings will likely continue through
the remainder of the 2H2010 as well as the seasonally slow 1Q2011. We Relative Performance To FBM KLCI
have given management the benefit of doubt and assumed the company
will be able to secure new vessel charters – this implies that there could be FBM KLCI

further downside risk to our forecasts if conditions do not improve.

Petra Perdana
♦ Investment case. Although the management tussle has passed, the
company’s troubles have continued mainly due to the earlier ramp-up in
the fleet (and made worse by the off-balance sheet vessel financing
structure). We believe this will turn more positive when offshore activity
recovers, and when that happens, the turnaround will be significant. The
company will thus have to ride through this period of uncertainty. In the Yap Huey Chiang
meantime, we do not expect the stock to perform without better visibility (603) 92802239
on the outlook. Hence, we reiterate our Underperform call on the stock yap.huey.chiang@rhb.com.my
with new fair value of RM0.50 (vs. RM1.15 previously) based on
unchanged target FY11 PER of 10x.

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 26 August 2010

Table 2: Quarterly Review

QoQ YoY 1H09 1H10 YoY
FYE Dec (RMm) 2Q09 1Q10 2Q10 Comments
(%) (%) (%)
Marine 61.0 50.9 57.4 13 (6) 130.8 108.3 (17) Revenue was sustained as
charter rates and utilisation of
existing vessels stabilised.
However, five new vessels were
delivered, including two 12k HP
AHTS, two workboats and one
workbarge which were not
utilised during the quarter.
Petra Energy 105.3 - - n.m. n.m. 198.8 - n.m. Petra Energy deconsolidated.
Revenue 166.3 50.9 57.4 13 (66) 329.5 108.3 (67)
EBITDA 42.6 7.5 (10.1) n.m. n.m. 90.0 (2.6) n.m. Although charter rates appeared
to be stable, the loss was mainly
attributed to lease rental charges
for off-balance sheet vessels that
were not fully utilised, plus
mobilisation costs for the five
new vessels.
Margin (%) 25.6% 14.8% -17.6% 27.3% -2.4%
Dep/amort (12.3) (8.4) (9.5) 12 (23) (23.8) (17.9) (25) Higher depreciation due to new
vessels
Net interest (9.0) (5.2) (5.9) 13 (34) (19.3) (11.1) (42) Net debt rose to RM217m end-
Jun 10 vs. end-Mar of RM182m.
Exceptional - 8.3 (8.7) n.m. n.m. - (0.4) n.m. Disposal gains of RM8.3m in
items 1Q10 + RM8.7m fair value
adjustment under FRS139 in
2Q10.
Associate 2.0 (0.7) n.m. n.m - 1.3 n.m. 29.6%-owned associate Petra
Energy contributed a loss in the
2Q due to weaker offshore
activity.
Total PBT 21.2 4.2 (34.8) n.m. (264) 46.9 (30.7) n.m. Loss mainly due to weaker
offshore activity, lease financing
for off-balance sheet vessels,
and mobilisation costs for new
vessels.
Tax (3.2) (0.5) 1.8 n.m. n.m. (6.9) 1.2 n.m.
Effective tax rate 15.1% -13.3% 6.8% 14.6% 4.0%
(%)
Minority interest (2.5) (0.0) 0.1 n.m. n.m. (5.9) 0.1 n.m.
Net profit 15.6 3.6 (33.0) n.m. n.m. 34.2 (29.4) n.m.
Core net profit 15.6 (4.7) (24.3) n.m. n.m. 34.2 (29.0) n.m.
Net cash/(debt) (310.3) (182.2) (217.2) 19 (30) (310.3) (217.2) (30)
Net gearing (x) 0.5 0.4 0.4 19 (19) 0.5 0.4
Source: Company, RHBRI

Table 3. Sum-Of-Parts Fair Value Calculation

Fair Value
(RMm)
Marine (based on 10x FY11 PER) 130.3
Petra Energy (29.6% share of FV, based on 9x FY10 PER - 10% discount to Petra Perdana) 33.9
Total 164.1
SOP fair value per share (RM) 0.50
Share price (RM) 1.23
Upside (%) (59)
Source: RHBRI estimate

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 26 August 2010

Table 4. Earnings Forecasts Table 5. Forecast Assumptions

FYE Dec (RMm) FY09 FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F
Marine 227.9 222.2 286.6 321.1 AHTS available fleet capacity (hp) 170,094 185,094 185,094
Engineering 377.8 - - - Avg capacity utilisation (%) 61.7 68.6 78.1
Revenue 605.7 222.2 286.6 321.1 Avg charter rate (US$/hp/day) 1.94 2.14 2.14

EBITDA 130.4 29.8 80.1 100.5 Source: Company data, RHBRI estimates
EBITDA margin (%) 21.5 13.4 27.9 31.3
Net interest expense (32.7) (25.0) (23.0) (23.0)
Depreciation (49.0) (41.7) (43.7) (46.1)
Excep items - (0.4) - -
Associate - PEnergy (0.7) (0.8) 4.2 6.2
Pre-tax profit 48.7 (38.0) 17.5 37.5
Tax (11.5) 0.1 (0.3) (0.4)
Effective tax rate (%) 23.7 0.1 1.9 1.1
MI (7.0) - - -
Net profit 30.1 (38.0) 17.2 37.1
Core net profit 30.1 (37.6) 17.2 37.1
Growth (%) (53.7) n.m. n.m. 115.7
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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