By Lawrence Yong
Petra Energy Bhd shares, which have rallied by over 40 percent in two weeks after it was touted to win some RM2.5 billion in contracts, are already fairly valued, a Public Investment Bank (PIVB) backed research house said in its first report on the company.
Petra’s ambitions now extend far beyond the group’s current assets capacity to deliver, the analysts said. The group has seen revenues remain relatively flat from 2010 to 2012, though it was able to grow net income to RM7.4 million in FY12 from RM3.3 million in FY11. Last Friday, Petra said its 1Q13 net profits fell 69 percent to RM2.2. million.
“We believe the stock is fairly valued at the current price level, having factored in a RM2 billion contract assumption from Pan Malaysia,” PIVB research analyst Nuraida Mohd Ali noted.
In the post-GE 13 period, Petra’s shares have rallied by a sharp 42 percent to trade at the RM2.10-RM2.15 levels, their highest since 2008. The company may benefit from a slate of oil service contracts to be awarded under the Pan Malaysia hook up, construction and commission job.
Separately, analysts from Affin Investment Research also on Monday called for investors to take profit from Petra’s share price rally based on its weak financial showing. On its core brownfield services, Petra reported a sharp pre-tax loss of RM7 million in 1Q13 versus RM3 million profits in 1Q12. Brownfield business accounted for 80 percent of its revenue.
Looking ahead, PIVB however said that it may re-rate the stock if several positive factors firm up. Besides its foray into marginal oil field development through a 30-percent stake in Kapal, Banang and Meranti (KBM) with Coastal Energy last year, Petra was also pursuing new subsea services business and enhanced oil recovery (EOR) projects. The group plans to charter two or three more work boats (delivery in May 2013 and March 2014) to expand its asset base.
Petra Energy’s seven marine vessels were already fully utilized, PIVB noted. (see table.)
Compared to its industry peers, Petra’s has a lead due to its experience in HUCC jobs. This is a hot sector with RM8-RM10 billion worth of contracts to be awarded soon by Petronas Carigali, Shell and others. About 72 percent of Petra’s business comes from Shell’s companies in Sabah and Sarawak, while Carigali accounts for 18 percent.
According to PIVB, Petra was aggressively bidding up to 10 times (RM5 billion) more oil and gas service jobs than its current orderbook of about RM500 million. However, PIVB estimated that Petra may comfortably get only about RM2 billion new contracts.
The company, with a market cap of about RM685 million, has three major shareholders – East Malaysian businessman Bustari Yusoff, through Shorefield Resources (27.3 percent), Wah Seong Corp.’s Wasco Energy (26.9 percent) and the brother of Malaysia’s prime minister – Mohamed Nizam Abdul Razak (9.1 percent).
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