THE BUZZ
Last Friday, SapuraKencana Petroleum (SKP) announced that its wholly-owned subsidiary, Geomark SB, had entered into a share sale agreement with Quippo Prakash Marine Holdings Pte Ltd (QPMH), MDL Energy Pvt Ltd (MDL) and Quippo Oil and Gas Infrastructure Ltd (QOGIL) to acquire 74k ordinary shares of SGD1.00 each in QP for USD22.5m, equivalent to 74% of the latter’s issued and paid-up capital. Incorporated in Singapore, QP’s principal activity is marine vessel chartering. The acquisition is expected to be completed within two months.
OUR TAKE
Rationale of the acquisition. SKP will gain full control of QP’s vessels in order to better manage the latter’s operational schedules and costs.
Positive news, but our FY13-14 forecasts are unchanged. Although the historical net profit guidance for QP provided in the announcement was USD3.9m (RM12.1m) for 31 March 2012, the potential net profit contribution of about RM9.0m is immaterial to our full-year FY13 and FY14 net profit forecasts of RM721.6m and RM761.9m respectively. Hence, we are keeping our FY13-14 earnings projections unchanged for now.
SKP remains our top pick for the O&G sector, besides Dialog. We like the merged entity for being a full-fledged engineering, procurement, construction, installation and commissioning oil and gas (O&G) provider. With this business model, we believe the group will be well positioned to target the large-scale and more lucrative O&G projects in and outside Malaysia. As a one-stop solution provider, SKP will be able to take on the role of main contractor and hence, reap higher project margins, as it is likely to be awarded entire contracts rather than given piecemeal jobs.
Maintain Buy. Our fair value for SKP is RM2.88, based on a PER of 20x FY13 EPS. Going forward, we think there are still many opportunities for SKP to beef up its orderbook further in the coming months, especially from Petronas, which should also be increasing its local exploration and production capex to temporarily substitute the loss of production from its Sudan operation.
Source: OSK
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