Perisai Petroleum – Pumped up by an attractive profit guarantee (CIMB)

Garuda’s vendor has guaranteed Perisai an attractive RM50m annual net profit for the duration of a 2+1+1 contract for the charter of a MOPU. The profit guarantee, which is a positive surprise as it is 25% higher than our RM40m annual profit forecast for Garuda, provides a safeguard to Perisai. Factoring in the higher profit for Garuda from 4Q11 onwards, we raise our EPS forecasts for Perisai by 6.1% for FY11, 9.7% for FY12 and 10.3% for FY13. This increases our target price from RM1.40 to RM1.60, which we continue to peg to our target market P/E of 14.5x. This profit guarantee could spark a re-rating of Perisai, which we continue to rate a BUY. Other potential catalysts are a marginal field venture and fleet expansion. Perisai’s 3-year EPS CAGR is a hard-to-beat 95% while FY12-13x P/Es are below 7x.