(July 2, RM1.24)
Maintain outperform at RM1.28 with lower target price of RM1.92 (from RM1.96): Petra Perdana has completed the 10% private placement of new shares to Nam Cheong. Priced at RM1.32 per share, the exercise raised RM39.3 million worth of gross proceeds, which will be used as the deposit for two new vessels.
The new shares was listed July 2. We scale back our FY2010-12 EPS forecasts by 2% to 5%, as contribution from the two new vessels cannot fully offset the dilution from the new shares.
Consequently, our sum-of-parts (SOP)-based target price is lowered from RM1.96 to RM1.92. Petra Perdana remains an outperform, with the potential re-rating triggers being 1) an end to the boardroom tussle, 2) delivery of new vessels, and 3) improved vessel utilisation rate.
Petra Perdana raised gross proceeds of RM39.3 million from the private placement exercise. The proceeds will be used to pay for the deposit of two new vessels, namely Petra Marathon and Petra Superior.
Petra Marathon is a 12,240HP anchor handling tug supply vessel while Petra Superior is a work barge that can accommodate 300 men. Essentially, a work barge is a “floating hotel”.
The shareholders approved Petra Perdana’s proposal to place out new shares to Sarawak-based shipbuilder Nam Cheong at the June 28 AGM.
We view positively the entrance of Nam Cheong as a major shareholder. Nam Cheong has access to shipyard capacity in Malaysia and China, which Petra Perdana could tap for its ongoing fleet expansion.
Nam Cheong is an experienced and reliable builder, supplying vessels not just to Petra Perdana but also to Kencana Petroleum, Bumi Armada, Borcos and Lembaga Tabung Haji’s TH Tech, among others.
Following the placement, Nam Cheong is now Petra Perdana’s fifth-largest shareholder. It will, however, not be able to vote when the AGM continues on July 20 and deliberates on the re-election of four directors, namely MD Shamsul Saad, Surya Hidayat Abdul Malik, Raja Anuar Raja Abu Hassan and Idris Zaidel.
[Petra Perdana issued a statement last Friday, announcing that the reconvened AGM would consider Resolution 11 on the election of Hamdan Rasid (a Lembaga Tabung Haji representative) and additional Resolutions No 12, 13 and 14 regarding the election of (nominees) Datuk Syed Norulzaman Syed Kamarulzaman, Suhaimi Badrul Jamil and Datuk Shaik Sulaiman S Mohamed Ismail]
The nominees were originally rejected on the grounds that they did not meet the minimum 5% shareholding requirement.
The new shares dilute our earnings forecasts by 4.8% in FY2010 and 9.1% in FY2011-12, but contribution from the two new vessels partly offsets the dilution. Imputing the earnings dilution from the new shares and contribution from the new assets, we reduce our EPS forecasts by 2.5% in FY2010, 3.2% in FY2011 and 4.1% in FY2012.
The earnings downgrade has the effect of lowering our SOP-based target price from RM1.96 to RM1.92. Nonetheless, we hold the view that Nam Cheong will prove to be a strategic partner for Petra Perdana.
Congestion at the shipyard is often cited by marine support players as the cause of delay in vessel deliveries. With Nam Cheong as a major shareholder, the risk of late deliveries by Petra Perdana could lessen. As at March 31, Petra Perdana’s net tangible asset stood at RM1.70 per share. — CIMB Research, July 2
This article appeared in The Edge Financial Daily, July 5, 2010.
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