01 May 2012
CIMB Research positive on Perdana Petroleum's proposed disposal of Petra Energy stake as divestment could help Perdana reduce its borrowings and return to profitability, target price 85 sen
(PERDANA closing stock price yesterday (30.4.2012) was 61.5 sen)
We view favourably Perdana Petroleum Bhd's proposed sale of its 26.9% stake in its associate Petra Energy as Perdana lost control of the latter in the financial year ending Dec 31, 2009 (FY09).
The stake is valued at RM67mil, which could help Perdana trim its debt and return to the black. Therefore, we continue to rate Perdana a “trading buy” as we expect the sale of the stake to be a short-term catalyst for the stock.
Perdana is currently undertaking a restricted tender process for the proposed divestment of its entire 26.9% stake, which accounts for 57.7 million shares in Petra Energy. To obtain maximum value for the stake, the restricted tender is open to selected pre-qualified parties.
The announcement did not come to us as a surprise. The divestment is long overdue as Perdana lost control of Petra in FY09. The biggest shareholder in Petra is Shorefield Resources, which holds a 27.3% stake. Sarawak-based businessman Datuk Bustari Yusof owns Shorefield.
For the financial year ending Dec 31, 2011 (FY11), Petra turned in a 36% growth in net profit to RM3.5mil.
Last Friday, Petra closed at RM1.16, valuing Perdana's stake at RM67mil. However, as at Dec 31, 2011, Petra's net tangible asset (NTA) stood at RM1.52 per share, which suggests that Perdana's stake could fetch a higher price. Perdana's cost matches the NTA.
As at end-December 2011, Perdana's net gearing stood at 0.4 times. Assuming the sale of the 26.9% stake at Petra's last closing price of RM1.16, net gearing would fall to 0.3 times. However, should the stake be divested at Petra's NTA per share of RM1.52, Perdana's net gearing would drop to 0.25 time.
Investors should stay invested as proceeds from the divestment could help Perdana reduce its borrowings and return to profitability.
Although marine support remains the weakest segment in the oil and gas sector but the signs are pointing to further recovery this year. Perdana posted a core net loss of RM27mil in FY11, which is a big improvement on FY10's RM61mil loss.