AVENUE Securities expects Petra Perdana Bhd’s earnings growth to be driven by sustained high oil prices and technology improvements, which would make development in marginal fields more viable.
The high number of old platforms in Malaysia and the region, as well as the potential of more platforms given the continued oil and gas (O&G) field discoveries, are also very promising for Petra.
Avenue Securities noted that Petra was looking at various ways to reduce its gearing level, which involved some internal restructuring.
“We believe this would undeniably be value enhancing to shareholders,” it said.
The group has been aggressively expanding its marine services division through acquisitions, resulting in net gearing jumping from 91% as at end 2004 to 184.3% as at Sept 30, 2005. “Admitting the current high gearing level is a concern, management is committed to reduce gearing level to below 1.2 times over the next 12 months,” it added.
It noted that work for Shell Sarawak was also progressing well. Petra has mobilised seven vessels for the RM600mil topside maintenance, hook-up and commissioning and construction services contract.
On the group’s marine support services division, Avenue Securities said all vessels were currently utilised via a mix of long and short-term contracts.
“Given the expected strong demand in marine services, Petra is planning to increase its fleet size from the current 23 to 28 by the year ending Dec 31, 2007,” it said.
The research house is maintaining an “outperform” call on Petra. “Despite the strong share price performance over the past one month, valuations remain undemanding,” it said.
ECM Libra noted that Petra's results for the year ended Dec 31, 2005, were in line with its estimates and consensus. “Despite being in a growth phase, Petra still declared a small final dividend of 1.8 sen per share, which is equivalent to a yield of 0.6%,” it said.
ECM Libra believes that Petra's outlook for financial years 2006 and 2007 remains positive with a higher utilisation rate for its vessels.
Revenue flows are expected to be smooth this year, as there will be no set-up costs incurred in preparation for the Shell Sarawak contract, unlike 2005.
“In addition, we draw comfort that a large proportion of Petra's vessels are on spot charter, hence benefiting from the increasing vessel charter rates.
“With overall charter rates rising by more than 20% over the last two years, owning vessels gives Petra the competitive edge against its peers,” ECM Libra said.
It is maintaining a 'buy' call on Petra.
“We like Petra for its outstanding potential boost in revenue and earnings going forward. These are well supported by its RM600mil contract from Shell which will sustain its revenue over another three years,” it said.
Mayban Research expects the play on the oil and gas industry to be strong in 2006 as exploration and production (E&P) activities are expected to continue due to strong demand for oil and gas as a fuel source.
“We expect E&P activities in Malaysia to remain high with continued investment from Petronas and the multinational oil majors,” Mayban Research said.
Murphy Oil, which is now developing the deepwater Kikeh field, has awarded three contracts. “According to Murphy Oil, the Kikeh field has a recoverable reserve base in excess of 400 million barrels with associated expansion ability. With first production expected in 2007, we foresee more contracts to be awarded in 2006,” the research house said.
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