More On Perisai

So much has been written about Perisai 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 http://goodstockbadstock.blogspot.com/2011/04/extended-version-oi-perisai-apa-macam.html

• 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.

LOL!