Sunday, April 03, 2011

More On Perisai

So much has been written about and I am sure much more will be said about Perisai in the near future.

So where are we now with Perisai? We know that Perisai soared from 73 sen on 23 Mar and by 31 Mar it hit a high of 93 sen. And during this period, Legg Mason Sold Every Single Share Of Perisai They Had Bought On 23 Mar 2011

Yeah every single share purchased by Legg Mason has been sold.

Makes you wonder why Legg Mason entered the trade on 23 Mar.

And no I would NOT dare insinuate that Legg Mason got some privy info and after all on Friday, April Fool's day, Perisai explains its proposed Garuda Energy deal‎ on Star Biz.

However the last statement was interesting.

  • “The reason why we made the announcement is because we did not want speculation on our share price while we were starting to talk (with Nagendran). So we carved out some basic terms while we pursue due diligence,” he said. ( he = Perisai managing director Zainol Izzet Mohamed Ishak)

Perisai's MD declared they did not want speculation.

But here's the chart of Perisai on 31 st Mar 2011 ( Perisai's Garuda deal was announced to the local media on 30 Mar)

Now if Perisai was gauged on its earnings, in my flawed opinion, I thought it wsn't the best of the best of all oil and gas stocks but neither it was the worst. It was just really average. And could an average stock soared like that without speculation? I wonder.

To back up my average claim, for example, take a brief look at its recent earnings.

Feb 2011: Quarterly rpt on consolidated results for the financial period ended 31/12/2010 - Perisai made 6.929 million for its Q4 quarterly earning. Not bad. But when you look at total fiscal year - Perisai made only 10.2 million for fy 2010 compared to an earnings of 32.98 million for fy 2009. Obvious question is why the drastic decline in yearly earnings?

Nov 2010: Quarterly rpt on consolidated results for the financial period ended 30/9/2010 - Perisai lost some 8.6 million for the quarter.

Yeah.. that's my reasoning why I am saying "Perisai was gauge on its earnings, it wsn't the best of the best of all oil and gas stocks but neither it was the worst. It was just average. "

So with a stock having average earnings, surely some strong speculation existed to drive that stock so high, yes?

Now that's my flawed reasoning. Which is why I am confused why the MD said on April Fool's day that “The reason why we made the announcement is because we did not want speculation on our share price while we were starting to talk (with Nagendran). So we carved out some basic terms while we pursue due diligence,”

And why did Legg Mason buy and exited in such a haste? (ps: The amount sold represented a 5.1% equity stake in Perisai! )

How? What's your own conclusion on this?

Now the Garuda deal.

In a deal, most would ask is the deal priced fairly ( I hope I can use the word FAIR and I hope I would not get whacked like how Sir Alex Ferguson got whacked for using the word FAIR! :P ) and what kind of benefit or reward does the deal bring?

Now if one is a minority shareholder, these are the questions you would want to ask, yes? Yes, as a minority shareholder, you are indeed part owner of the business and as a part owner of a business these are the very questions you would want to ask!

Is the deal (Perisai's purchase of Garuda) priced fairly?

Now in the posting Featured Post: Legg Mason Sold Every Single Share Of Perisai They Had Bought On 23 Mar 2011 , snowball makes a simple comparion:

  • With all that technical stuff being clear up, I think I can be pretty certain that Kencana is also building a MOPU for production in marginal oil fields in Malaysia. Kencana build it for RM115mil while our friends in Perisai said that their MOPU cost RM210 mil (taken directly from filings, without adjusting the discount in value of the share component of the acquisition), almost 83% more than Kencana.

Yes, why Perisai's purchase of Garuda's MOPU cost 83% more?

In the posting, Perisai's Reply To Bursa Query, Perisai furnish data on the impact on the Net Asset per share and share capital. The snap shot was most revealing.

Note the huge jump in Perisai's total borrowings? Snowball too had highlighted this issue.

  • They assume RM120mil of debt on top of the RM210mil paid to Nagendren. Since when does debt is not an important part in an acquisition? There is not a need to tell shareholder on how much debt you have taken? To hide in under the footnotes seems to indicate that Perisai do not want the shareholders to know.

Garuda carries RM 120 million debt in its balance sheet!

And when Perisai buys Garuda, perhaps the debt is the freebie for Perisai! LOL!

Now does that sound like a good deal?

And as we are aware the MOPU is not completed. Perisai is buying a company for a MOPU that is not fully converted. And the company, Garuda, carries a 120 million debt.

Ah.. some inquiry mind would wonder what if this debt is used to complete the conversion of the MOPU? Is that not possible? If so, what a sweet deal, eh?

Now what kind of reward does the deal bring?

From Perisai's Reply To Bursa Query, Perisai said:

  • The expected revenue of USD25 million is based on the bareboat charter to be entered between the Target Company and GEM.

USD25 million revenue per year was all that was said by Perisai. No profit guidance. Not a single sen. And yet this is a 210 million deal. A 210 million deal with no profit guidance!

Now this figure is being questioned by snowball in his latest posting

  • So, the contract is worth RM36.7 million per year or USD12.2/million per year. Wah, Perisai MOPU charter rate is USD 25mil/year while Tanjong MOPU charter rate is USD12.2/million per year. But, it seems that Tanjong Offshore get ripped off in this case as Perisai charter rate is much higher.

( snowball in his posting also address the possibility of different production capacity - do read his post why he thinks is not possible here )

Now if snowball reasoning is correct, why is Perisai MOPU's charter rate so much higher?

How? How would you interpret and analyse all this? Think about it.

Questions are asked why the MOPU is priced much higher and questions why this MOPU appears to be able to generate much more revenue than others?

Two important issue to address yes?

And again, like Prashan asked, what if Legg Mason smelt the rat here? Could this be the possible reason why it sold everything it had bought a few days earlier?

And oh... this posting is not about the stock. Please get this issue crystal clear!

Seriously, I have no motivation to know or guess how the stock would perform. In a hot market, any stocks stands a fairly good chance of moving higher despite all logical reasoning. Me? I rather keep my sanity and my logical reasoning and retire.



solomon said...

Purely on fact, the 2 drilling rigs were bought and sold at Usd10mil, both from first vendor to perisai and then to the ex MD. There is only one rig tagged to Garuda for usd5mil., another with Hummingbird.

First time hearing tanjung offshore is Ananda's vehicle, maybe some mix up here.

Yup, the consideration seemed to balloon to rm330mil with the debt assumption. I guess it will better to understand the capacity of this MOPU and see the savings compare with the conventional oil extraction method. Then, we will be able to better apprehend the subject.

Moolah said...

solomon: thanks for the correction. That remark had been removed in the posting.

Yes, Perisai used two companies to purchase the jackup rigs in 2010. My bad. :)

Now there is an interesting issue. In that purchase, Perisai said the following:


The Acquisition of Rigs will provide a platform to convert the Rigs into MOPSUTM” and to generate robust earnings by hiring them to these oil and gas field owners. The acquisition is synergistic to the evolved activities of Perisai to serve as a one stop centre for its planned marginal field development and deepwater activities.

The conversion will take advantage of the current low steel prices and fabrication rates and provide an avenue to bring in the profits earlier than anticipated.

Taken from: bursa announcement doc posted by Perisai here

So Perisai reckons buying jackup rigs and converting them into MOPU is a good idea. This was mentioned by Perisai in Dec 2009. However if it was such a good idea, why Perisai sold it to Nagendren in April 2010?

And why back up from Nagendren now?

Makes me wonder.

snowball said...


Thanks for the information on Ananda. Mistake has been corrected.


If someone were to just ignore the noise, go to Bursa announcement, spend 10 minutes to read the relevant announcement from around late 2009 to now, one would have raise a lot of questions.

BTW, Perisai said they are unable to disclose the date of the award of the charter contract due to confidentiality. I wonder what is so confidential about the date of the award? What kind of information that one can actually get from the date of the award? If their customer don't want people to know right, they can just don't make it public and no one would no, the date is not important. If the information is public, one can just go look up for Gryphon and we will find out the date of the award.

Did the date tell us about something that we should not have known? Did the date is earlier than the USD5mil disposal? Would that make their reason for disposal of "not taking risk" not really relevant? LOL...I am thinking too much here.

But, to think some more ha, since I like to ask so many stupid stuff, What bank would actually lend RM120mil to a company that do not generate any income to build a hard to sell asset? Are there any contract in place that somehow prompt the bank to lend money to them? Since Nagendren do not have enough money, do you think the Singapore shipyard will help him construct the MOPU? So, the bank loan should be secure very earlier on during the construction, just after the USD 5mil disposal. But, rational bank will only lend money if there is some guarantee of income, especially for such a complicated assets...hmmm..

LOL..I think too much liao..

Moolah said...

snowball: remark removed. ;)

snowball said...