News SKPETRO announced that its subsidiary
Kencana HL had been awarded a letter of award from the Kebabangan Petroleum
Operating Company Sdn Bhd (“KPOC”) for the provision of hook-up and commissioning
(HUC) services for the Kebabangan project.
The contract is estimated to be worth approximately RM106m.
It is expected to commence in mid-12 and completed in
mid-14.
Comments We are neutral on the win as the contract sum
is marginal versus Kencana’s current EPCIC order book of RM2.4b as at May-2012.
We have already
factored in further
EPC wins of RM2.0b for Kencana HL in FY14.
Note that the company is also undertaking the fabrication of
the substructure for the KPOC project.
Outlook We are positive on the merged entity for its
1) scale and 2) existing global track record, which will enhance its
competitive edge during new contract bids.
We believe SKPETRO is one of the main beneficiaries for new
fabrication tenders coming up for the Dulang, Samarang and Bokor fields.
Forecast Maintaining our FY13-14 net profit estimates
of RM469.1m and RM719.2m respectively.
Rating MAINTAIN OUTPERFORM
Valuation Our fair value remains unchanged at
RM2.79/share, (based on 20x PER, a close approximate to the average of the
trading PERs of Bumi Armada and MMHE, which are at around 19.0x and 22.6x respectively
at this juncture).
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 during international
project bids could lead to lowered margins just to win jobs.Source: Kenanga
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