Business

Friday November 13, 2009

Petra Perdana rebounds from one-month low

hungyee@thestar.com.my


It may disappoint investors with weak Q3 results, says report

By LEONG HUNG YEE

PETALING JAYA: Petra Perdana Bhd rebounded yesterday, adding 2 sen to RM2.17, after the stock had fallen steadily from a one-month high of RM2.72 on Oct 23 to a one-month low of RM2.11 on Wednesday.

It had hovered around the RM2.50 level on average.

CIMB Investment Bank said in a recent report that the oil and gas company might disappoint investors with weak third-quarter financial results.

Investors reacted to the report and started selling, causing Petra Perdana to experience the sharpest decline of more than 10% on Wednesday.

CIMB gathered that Petra Perdana’s utilisation of vessels had plunged to 49% in the third quarter ended Sept 30 from the second quarter’s 65% and an average of 85% in the financial year ended Dec 31, 2008 (FY08).

The research house added that the late delivery of new vessels, the preference for long-term charters as opposed to more lucrative spot charters and the slowdown of activities at 60%-owned Petra Energy Bhd, would also add to the earnings shortfall.

CIMB cautioned its investors of a potential 27% to 34% earnings cut and a review of its target price and recommendation.

“The third-quarter earnings setback is likely de-rating catalyst, along with a prolonged period of depressed utilisation rates.

“We advise investors to switch to Kencana Petroleum Bhd or SapuraCrest Petroleum Bhd,” it said.

“The anticipated third-quarter 2009 results letdown would make it the sixth consecutive quarter of earnings miss relative to both our expectations and consensus.”

Petra Perdana currently owns 24 vessels and is awaiting the delivery of nine more ships between now and end-2010.

RHB Research Institute Sdn Bhd understood from the management of Petra Perdana that its third-quarter average utilisation rates had fallen to 50% as four vessels were idle in September to October as their spot charters had lapsed.

“We believe oil majors’ preference for long-term (more than a year) charters which offer lower rates and stable income has worked against Petra Perdana as most of its vessels are on spot and term charters (less than a year),” RHB said.

The research house said Petra Perdana’s earnings disappointment in FY08 was partly caused by lease charges and related costs for two new anchor handling tug and supply vessels delivered in the fourth quarter 2008 and are inccurred during the transit from China shipyard to Singapore.

“Hence, we believe lease charges and related costs would likely impact fourth-quarter 2009 earnings given mobilisation costs for the five vessels as well as lease charges arising from potential delay in securing contracts for these vessels,” RHB said.

It believed the medium-term demand outlook for the offshore support vessels had deteriorated amid still uninspiring drilling activity and supply glut. The research house had downgraded the stock to “underperform”.

 
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