Petra - will you buy for recovery? The worst may be over

Let's check the financial: ANG ANG ANG

inancial Summary (20101124FA00282)
Company Name	PETRA PERDANA BHD
Stock Code / Short Name	7108 / PETRA
Date & Time Announce	24/11/2010 6:16:55 PM
Subject	Quarterly rpt on consolidated results for the financial period ended 30/9/2010

Content

CONSOLIDATED INCOME STATEMENT

			INDIVIDUAL PERIOD		CUMULATIVE PERIOD
			CURRENT YEAR QUARTER	PRECEDING YEAR CORRESPONDING QUARTER	CURRENT YEAR TO DATE	PRECEDING YEAR CORRESPONDING PERIOD
			30/09/2010	30/09/2009	30/09/2010	30/09/2009
			RM'000	RM'000	RM'000	RM'000
1		Revenue	70,919	156,737	179,198	486,265
2	(a)	Profit/(loss) before income tax, minority interests and extraordinary items after share of profits and losses of associated companies	-22,892	-2,887	-53,562	44,048
	(b)	Net Profit/(loss) from ordinary activities attributable to members of the company	-23,849	-8,080	-53,290	32,000
	(c)	Net profit/(loss) attributable to members of the company	-23,734	-8,938	-53,114	25,267
	(a)	Basic (based on ordinary shares - sen)	-7.25	-3.00	-17.27	8.49
4	(a)	Dividend per share (sen)
5		Net Assets Per Share Attributable To Ordinary Equity Holder Of The Parent (RM)	1.40	1.89

Remarks

What OSK research say?? The worst may be OVER.

Recently, we visited Petra Perdana and conclude that the worst for the company

should be over. It appears to us that the company’s share price should have hit

bottom after consolidating for some 2 months. Going forward, we believe the

appreciation in its share price would be news driven. Maintain Trading Buy.

Stock should have hit a trough. Petra Perdana’s share price hit the lowest point of

RM0.735 recently and we believe that it has hit bottom. The company has successfully

completed its 3:8 RI exercise, which had been view negatively by some investors. Also, we

believe there is unlikely to be a further downgrade by MARC on its RM800m dual currency

revolving facility in the immediate term since the rating was done just recently. Finally, we

think the 2QFY10 quarter was possibly the worst for the company when it reported a net

loss of RM33.0m, which it managed to improve its performance in 3QFY10 by narrrowing

the loss by 28% q-o-q.

Share price appreciation to be news driven. We noted that the share price has been

consolidating at between RM0.735 and RM0.83 since 5 Oct 2010, and going by this trend,

we think there may be a breakout anytime soon. We think the catalysts that would drive this

breakout are: i) the recently awarded hook-up and commissioning job worth RM400m to its

29.6% associate, Petra Energy, which may be chartering workbarges and workboats from

Petra Perdana since most of Petra Energy’s vessels are currently busy servicing its Shell

maintenance contract; ii) the award of marginal oilfield contracts such as the Sepat oilfield

to its associates’ competitors which may not have enough assets to support those

operations may give rise to demand for the company’s workbarges and workboats; iii)

securing spot/LT charters for its unutilized vessels; the utilization rate for its AHTS is at

about 50%; iv) reporting a better q-o-q performance for its 4QFY10, during which it could

potentially break even; v) the development of the deepwater fields of Malikai and

Kebabangan would require Petra Perdana’s high horse-power vessels, and vi)

improvement in charter rates for its 10-12k bhp AHTS to above break-even level.

Maintain Trading Buy. To recap, we recently upgraded our call on the stock to Trading

Buy from Neutral since we saw the q-o-q operational improvement in the company. At the

time of writing this report, its share price had already undergone close to 2 months of

consolidation. Our target price for the company remains unchanged at RM0.94 based on a

PER of 9x FY11 earnings.