5 October 2011

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Table 1 : Oil And Gas Sector Valuations

FYE Price Fair

value EPS

(sen) EPS growth

(%) PER (x)

P/NTA (x)

P/CF (x)

NDY (%) Rec

(RM/s) (RM/s) FY12 FY13 FY12 FY13 FY12 FY13 FY12 FY12 FY12 Perdana Petroleum Dec 0.62 0.60 6.6 9.5 92.1 45.5 9.6 6.6 0.6 3.6 3.2 MP Dayang Dec 1.52 1.55 15.5 17.5 10.2 12.3 9.8 8.7 1.4 8.4 3.1 MP Sector Avg 7.9 7.3 15.3 14.3

Sector Avg (excl Pet Gas) 7.9 7.4 14.8 13.7

♦ Still in discussions. Dayang and Perdana announced yesterday, that whilst there had been exploratory and informal discussions, nothing firm had been reached between the parties beyond the normal course of vessel chartering activities. This was in response to The Edge weekly newspaper’s recent article highlighting a possible M&A between the two companies.

♦ No surprises. We are not surprised by this news as we had previously mentioned that: 1) Dayang is on the look-out for possible acquisitions/tie-ups given that it is sitting on a net cash position of RM131.9m as at 1HFY11 after divesting its stake in Borcos in Nov-10; and 2) The still weak charter environment and significantly low valuations make offshore vessel owners the prime candidates for any M&As.

♦ Eyeing Perdana Petroleum’s accommodation vessel fleet. We believe that the main driver for the tie-up is Perdana Petroleum’s accommodation vessel fleet (refer to Table 3) which fits in with Dayang’s brownfield work (topside maintenance and hook-up and commissioning). We also understand that Dayang is looking to tender for up to RM5bn jobs in FY12. Hence, a tie-up would allow for quick access to additional vessels. Dayang currently has five workboats (inclusive of one that is under construction).

♦ Pricing will be key issue. Perdana Petroleum’s share price has fallen to RM0.62/share which translates to only 0.6x P/BV (based on its 1HFY11 BV/share ratio of RM1.10). This is significantly below the company’s average historical 1-yr forward P/BV ratio of 2x. Assuming a 5% discount to the latest price, a 10% private placement would raise just RM26.5m for Perdana. This makes up only 10% of Perdana Petroleum’s debt commitments of RM267.7m as at 1HFY11. This might not be sufficient for Perdana Petroleum in terms of its debt commitments (refer to Table 6). However, it will be worth it for Dayang if the company gets first rights of refusal to charter could be worth it for Dayang if it gets first rights of refusal to charter Perdana’s vessels.

♦ Maintain Market Perform. We believe the tie-up is beneficial for the long-term prospects of both companies and foresee some near-term excitement for the share prices of both stocks. However, in the medium term we expect fears of a protracted downturn in the global economy to cap valuations for oil and gas stocks, especially those that are small cap like Dayang and Perdana Petroleum. We maintain respective fair value estimates for both stocks until a firm announcement has been made.

Corporate Highlights Sector Update

Oil And Gas Tie Up Between Dayang And Perdana Petroleum? M

alay

sia

5 October 2011

Recom : Neutral (Maintained)

MA

RK

ET D

AT

ELIN

E

PP 7

767/0

9/2

012(0

30475)

RHB Research Institute Sdn Bhd A member of the RHB Banking Group Company No: 233327 -M

Table 2. Basis For Fair Value Estimates

Company Valuation Basis

Dayang 10x FY12 PER

Perdana

Petroleum

0.5x P/NTA

Source: RHBRI

Yap Huey Chiang (603) 92802239

yap.huey.chiang@rhb.com.my

Please read important disclosures at the end of this report.

5 October 2011

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Table 3. Listed Offshore Marine Vessel Companies And Respective Market Capitalisation

Companies Share Price Market Cap No. of shares

Tanjung Offshore 0.755 220.41 291.94

Perdana Petroleum 0.615 276.82 450.12

Alam Maritim 0.700 551.05 787.21

Source: Bloomberg, Company; RHBRI

Table 4. Perdana Petroleum's Work Barge & Work Boat Fleet

Vessel No. of Pax Comments

Petra Enterprise 200

Petra Excelsior 300

Petra Liberty 169

Petra Sovereign 169

Petra Superior 300

IOS Jaguar 85

Petra Odessy Yet to be delivered

Source: Company Table 5. Dayang’s Work Boat Fleet

Vessel Built in Comments

Dayang Pertama 2005

Dayang Berlian 2007

Dayang Nilam 2008

Dayang Zamrud 2009

Dayang ??? Under Construction

Source: Company Table 6. Perdana Petroleum’s Debt Commitments (as at 1HFY11)

RM'm

Short Term Borrowings 116.56

Long Term Borrowings 151.2

267.7

Source: Company Figure 1. Perdana Petroleum Share Price Trend

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

RM

/sh

are

Source: Bloomberg, RHBRI

5 October 2011

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