News Sapura Kencana Petroleum (“SKPETRO”)
announced that it had entered into a Share Sale Agreement for the remaining 74%
interest in Quippo-Prakash Pte Ltd. (QP) for a sum of US$22.5m (RM69.8m). QP owns
the asset QP2000 (a Derrick Pipe Lay cum Accommodation Barge (DLB) with 2000mt
crane capacity) which SapuraCrest took a 26% stake in back in 2008. The
purchase is expected to be completed within the next two months.
The rationale for the purchase is to enable SKPETRO to have
a better control of the asset’s project scheduling and cost structure.
Comments According to the announcement, as at
31st Mar 2012, QP's net profit was US$3.9m (RM12.1m) and its net assets were
US$32.2m. This means the acquisition price is at 5.7x PER and 0.7x net asset, which
in our view is fair.
At this juncture, we believe QP2000 is mainly utilised for
the in-house Pan Malaysia contract that is under another subsidiary of SKPETRO,
TLO Offshore. As such, QP2000’s revenue is SKPETRO's cost and QP2000’s earnings
from other projects (besides the Pan Malaysia project) are SKPETRO’s associate
earnings.
We are positive on the purchase as it implies better asset
management for SKPETRO, which will also lead to margin accretion. However, we
believe any near term margin accretion is minimal until the company starts to
redeploy the asset for more third party contracts going ahead.
Outlook We are positive
on the merged entity for its scale and existing global track record, which will
enhance its competitive edge during new contract bids.
Forecast Maintaining our earnings
estimates as we believe near term earnings accretion will be minimal. We await
2QFY13 quarterly results for better clarity on margin accretion from the
synergy of the two businesses.
Rating MAINTAIN OUTPERFORM
Valuation Unchanged target price of RM2.51 is
based on 18x target PER on CY13 EPS.
Risks 1) Integration challenges given the size
and scale of both companies, 2) the need to continuously win sizeable contracts
to support bottom line growth and 3) intense competition to gain international
projects.
No comments:
Post a Comment