Despite the growing expectation of more local jobs being awarded by Petroliam Nasional Bhd (Petronas), Petra Perdana Bhd’s (PPB) share price, however, does not seem to reflect such a positive view at all. Judging by the company’s financials and the selling of its shares, PPB is still sailing in rough waters after its shareholders’ feud early this year.
For 1HFY2010 ended June 30, it reported a net loss of RM29.38 million versus a net profit of RM34.21 million a year earlier, while revenue was down 67% year-on-year to RM108.28 million from RM329.53 million.
The oil and gas (O&G) stock tumbled to 74.5 sen yesterday — its lowest level since June 2003. The counter has shed 41% year to date. It slipped from the year’s high of RM1.55 in early January.
The heavy selling on PPB, which is involved in chartering of support-service vessels to offshore oilfields, is mainly fuelled by concerns over its earnings prospects due to low vessel utilisation rates. Some of its vessels are said to be idle now.
Co-founder Tengku Ibrahim Petra Tengku Indra Petra is also unloading his shares on the open market, adding more selling pressure on the stock.
The company announced on Tuesday that Tengku Ibrahim ceased to be a substantial shareholder in PPB. He has pared his stake to 0.68% from 13% previously.
Furthermore, some 122.7 million shares from the company’s rights issue were listed on Bursa Malaysia recently. With such a big chunk of new shares (issued at 59 sen) flooding the market, it might take a while for the market to absorb the selling, said an analyst.
However, analysts said the ceasing of Tengku Ibrahim being a substantial shareholder is perceived to be an indicator that the selling pressure may ease soon.
Analysts tracking the stock concur that things will remain gloomy for PPB for the rest of the year. That said, some believe the company is indeed in a better position to bag the new charter contracts compared with its peers, such as Tanjung Offshore Bhd and Alam Maritim Resources Bhd.
Malaysian Rating Corp Bhd (MARC), which has put PPB on negative credit watch, noted that due to its inability to secure adequate contracts, six of its 23 offshore support vessels currently lying idle are awaiting disposal.
However, analysts said, the vessels that are lying idle now could be the wildcard for PPB to win more contracts than its competitors whose utilisation was already at 80%.
“When that happens, the revision of forecast earnings will probably be bigger in PPB compared with others,” said the analyst from ECM Libra.
PPB does not solely rely on Petronas jobs. It is learnt that the company is currently bidding for other charter contracts in the region. Should it win fresh contracts for the currently idle vessels, it will augur well for its earnings going forward.
According to OSK Research, the expiry of most of its existing vessel contracts worsens the already challenging operating environment for PPB.
“However, we believe 2011 will be a better year for all O&G players, including PPB, which could potentially be one of the biggest beneficiaries as it has the vessel capacity to take up new jobs,” it said, adding the present challenges facing PPB were temporary setbacks.
“Furthermore, we believe PPB could benefit from other deepwater activities in the pipeline after [Shell’s] Gumusut-Kakap deepwater project, since most of its high horsepower anchor-handling tug/supply vessels are not fully utilised to-date,” it noted.
Other deepwater fields that are still in planning stages include Shell’s Malikai, Ubah Cres and Pisangan fields and the Conoco-Philips Kebabangan field.
Another analyst from a local brokerage firm concurs that next year will be better for PPB, adding that a turnaround in FY2011 was likely although the company could still expect some challenges ahead.
“After paring down some borrowing costs and improving their utilisation rates, their 3QFY2010 results should show some improvement from 2QFY2010 results, although they still would not be great,” said the analyst.
Analysts are cautious that earnings visibility will only be certain when contracts, either from Petronas or other oil producers, are officially awarded.
Some quarters estimate that Petronas has jobs in excess of RM18 billion for the local O&G industry over the next four years.
Of these, PPB’s 29.59%-owned associate Petra Energy Bhd is said to be in the running for the hook-up and commissioning (HUC) and offshore-support-vessel portions of jobs in Tapis and in the Kebabangan cluster.
Petra Energy, along with Dayang Enterprise Holdings Bhd, Kencana Petroleum Bhd, and Shapadu Energy and Engineering Sdn Bhd, have been short-listed for Petronas’ HUC umbrella contracts or tenders.
“However, the timing of the award of contracts is still uncertain and is the key factor that improves earnings visibility,” said an industry observer. “This is why most analysts are neutral on the O&G sector despite the positive newsflows,” he added. - by Melody Song
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