CIMB Equities Research advises investors to accumulate Perisai Petroleum shares as it retains the target price at 63 sen, which is an upside of 46.8% over the last traded price of 43 sen.
“We conservatively removed two idle assets, namely mobile offshore production unit Rubicone and pipelay barge E3, from our forecasts. Should management secure contracts for these assets, the swing in earnings would be substantial,” it said on Friday.
CIMB Research said Perisai’s management has stated it is set to remain on the Securities Commission’s shariah compliance list in the May 2015 review after a successful conversion of US$170mil of conventional loans into an Islamic facility in the final week of FY14.
“We continue to value the stock at 10.5 times CY16 P/E, still at a 30% discount to the oil & gas big caps,” it said.
In the week of Dec 29, 2014, its management finalised the conversion of US$170mil of conventional loans for jack-up PP101 into an Islamic facility with no change in terms and rates and at a minimum paperwork charge.
With this development, Perisai is set to remain on the SC’s Shariah compliance list in the May 2015 review.
“We are encouraged that management took the initiative to meet the SC’s requirement for shariah compliance. As at Sept 30, 2014, Perisai’s total borrowings amounted to RM1.1bil, of which most were conventional, while total assets were worth RM2.4bil,” it said.
CIMB Research said the company’s total conventional borrowings over total assets, therefore, stood at 47%, higher than the 33% threshold set by the SC.
After the conversion, Perisai’s total conventional borrowings over total assets should be reduced to an estimated 21% by Dec 31, 2014, allowing the company to keep its Shariah-compliant status come May.
Another industry player, SapuraKencana, is in the midst of converting an estimated RM8bil out of RM15.3bil in borrowings (as at July 31, 2014), of which all are conventional, into Islamic instruments...
As for Perisai, CIMB Research is maintaining its Add call, with the deployment of Rubicone and E3 as potential re-rating catalysts.
