By Public Investment Bank Research (PVIB)
Target price: RM1.25
PETRA Energy Bhd posted an 84.8% earnings growth to RM17mil for the first half of the financial year ending Dec 31. This is achieved on the back of a 16.3% higher revenue to RM283.7mil.
The second quarter is a seasonally strong quarter. This helped boost the Petra’s results, driven by higher scheduled activities executed from the hook-up, commissioning (HuC) and top-side major maintenance (TMM) Petronas Carigali job.
Petra’s Kapal and Banang (KB) fields are producing better-than -expected oil output, coupled with a 17% lower capex usage of US$250mil. The initial production rates at KB fields were at 10,000 barrels of oil per day (bopd) with peak production at 22,000 bopd in the fourth quarter last year.
The expected target for the remuneration fee has been delayed to the first quarter of 2016 due to the weak oil price trends. As such, PVIB has lowered earnings estimates by 12.7% and 25% between 2015 and 2017. “We believe upon full capex reimbursement, the group’s gross gearing will reduce to 0.4 times from the current 0.6 times,” PVIB said.
However, the marine assets segment saw higher depreciation charges arising from the capitalisation of dry docking costs, with utilisation around the 60% range in the second quarter this year. The division is sustained by recurring contributions from vessels chartered to third parties mobilised for the Pan Malaysian contract activities.
PIVB added that HuC and TMM would continue to be the main driver, with most planned work orders in 2015 secured as part of its client’s activity schedule.
The research house is maintaining its “outperform” call but with a rolled-over target price of RM1.25 pegged to a lower price-to-earnings ratio of 10 times.
By CIMB Research
Target price: RM2.82
CIMB Research has cut Prestariang Bhd’s 2015 to 2017 full-year earning per sen forecasts by 10%-16% to factor in potential losses in UniMY and lower oil and gas training workers due to the current uncertain economic and market conditions.
“We are disappointed with the potential short-term delay in finalising the potential Pisa accelerated teaching project (PAP) contract but this is unavoidable. We take comfort from the fact that the strategic project management has been working on the past year is still on track to be finalised in the second half of the current financial year ending Dec 31,” CIMB said.
It added that the sale of Prestariang’s 30% stake in UniMY to Mara was also a negative, as the new Education Minister will need some time to familiarise himself with his new portfolio.
However, management is confident that the Pisa project and the sale of its 30% stake in UniMY to Mara deal will proceed.
On a more positive note, Prestariang’s management announced that they are looking to replicate of the success of the MLA2.0 contract (i.e. distribution of Microsoft software to all government agencies in the country) for other IT brands such as Oracle, Adobe and VMWare. CIMB expects to see more developments in this area by the fourth quarter.
CIMB has lowered Prestariang’s target price to RM2.82, based on a price-to-earnings ratio of 19.2 times. This translates into a 20% premium over the to reflect potential earnings enhancement from securing strategic new projects by year-end according to CIMB. The stock remains an “add”.
INARI AMERTON BHD
By HLIB Research
Target price: RM3.79
HONG Leong Investment Bank has maintained its “buy” rating on Inari with a higher target price of RM3.79.
Radio frequency (RF) remained the chief growth driver for Inari with a target of 30% year-on-year expansion in the full year ending June 20, 2016, HLIB said.
It added that Inari’s management remained bullish on RF’s and saw great potential to capitalise on the long-term evolution deployments in China, India, Middle East, Africa and Turkey. “While RF’s output volume will not surge significantly, module complexity – thanks to miniaturisation – has led to higher chip density/content which bode well for Inari.”
2016 capex is expected to reach RM110mil of which RM45mil is for machinery capacity expansion, RM20mil for automation, RM10mil for wafer testing and RM35mil for factory floor expansion.
After inking a licensing agreement with Avago, Inari South Keytech Sdn Bhd will extend its capability into sales and marketing for its products as it already has competencies in product development, validation, manufacturing and testing.
HLIB’s capex and new forex forecasts are on the assumption of RM3.80/US dollar. In turn, this has led to upward adjustments in the earnings per share for 2016 and 2017 by 0.9% and 5.4%, respectively.
Catalysts include wireless communications, diversifications into optoelectronics and test and measurements, favourable forex and a continuous effective operational strategy. Risks include single major client (Avago) risk, forex risks, patent disputes and labour shortage.
HLIB’s forecast for Inari is pegged to unchanged price-to-earnings ratio of 15 times which translates into a 10% premium over its global peers given the stronger greenback and high growth ahead.
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