Puncak Niaga - From offshore pipe laying to marginal oilfields HOLD

- Maintain HOLD on Puncak Niaga Holdings with an unchanged fair value of RM1.60/share – pegged to a 65% discount to its estimated break-up value. 

- Quoting Upstream Online, The Edge Weekly indicated that Puncak Niaga Holdings has emerged as one of the strong contenders for Petronas’ upcoming marginal oilfield projects. 

- The weekly revealed that Puncak has tied up with Londonbased Nio Petroleum Ltd to bid for Petronas’ upcoming batch of marginal oilfields. The duo is among 22 companies that Petronas has shortlisted for a risk sharing contract (RSC) to develop the marginal oilfields.

- Based on our channel checks, Nio Petroleum is a leading global oil & gas player which specialises in the development of marginal discoveries/accumulations of oil & gas fields, besides redeveloping previously matured, undiscovered fields.

- Nio Petroleum is majority controlled by its top management and Barclays Natural Resource Investments (BNRI), a unit of Barclays Bank Inc. Thus far, BNRI has injected US$100mil into Nio Petroleum.

- We understand that Nio Petroleum’s focus is on offshore oil & gas assets within Asia Pacific, specifically  in Malaysia, Thailand, Vietnam, Indonesia and Australia.

- Back in May 2010, Nio Petroleum acquired a 45% stake each in Blocks SB307 and SB308. Lundin Petroleum, the production sharing contract (PSC) operator, and Petronas Carigali, have a 42.5% and 15% stake, respectively.

- Presently, Puncak has an oil & gas order book of circa RM500mil through its wholly-owned GOM Resources – which is in the business of providing offshore installation contract (OIC) jobs.

- Recent reports had revealed that Puncak is targeting revenues of between RM1bil and RM1.5bil this year compared with RM289mil in FY10.

- We gather that Puncak’s latest moves suggest the group’s plans to extend its reach further into offshore exploration works from its existing pipe replacement businesses.

- We maintain our HOLD recommendation on Puncak for now, pending an update with management. Our rating on Puncak remains for now unless there is a resolution to the long-standing water impasse in Selangor.   

Source: AmeSecurities