- We maintain our HOLD recommendation on SapuraKencana
Petroleum (SapuraKencana) with an unchanged fair value of RM2.60/share, pegged
to an FY14F PE of 18x – 20% above the oil & gas sector’s 15x currently.
- We maintain SapuraKencana’s FY13F-FY15F net profits as the
group’s 1HFY13 results were in line with expectations, with a net profit of
RM218mil that accounts for 36% and 37% of our and consensus FY13F estimates,
respectively.
- The group’s 2QFY13 net profit surged 4.2x QoQ largely due
to the partial merger costs of RM75mil (vs. the prospectus’ estimated RM131mil)
and absence of contributions from Kencana Petroleum in 1QFY13 as the merger
with SapuraCrest Petroleum was only completed on 15 May 2012. Hence, we caution
against annualising the maiden result of the merged entities in comparing
against estimates.
- We expect the group’s offshore construction, hook-up &
commissioning and installation activities to remain strong QoQ in 3Q but taper
off towards the year-end monsoon period. The higher scope of works for the
Pan-Malaysian umbrella installation contract in 2Q-3QFY12 is expected to slacken
towards the end of the year whilst SapuraClough’s work on the Australia’s
Montara Development would have been completed.
- SapuraKencana’s order book was largely unchanged QoQ at
RM14.5bil (see Chart 3 for geographical breakdown) with the group securing
RM4.1bil of new projects year-to- date. The group expects to secure
RM5bil-RM6bil annually, with its potential tenders worth up to RM25bil.
- For the rest of the year, we expect a higher magnitude of newsflow
for hook-up, construction and commissioning (HUCC) works vs. pure fabrication
jobs. The tenders which the group is bidding for include the RM8bil-RM10bil
PanMalaysian umbrella HUCC contract and RM600mil subsea maintenance job, which
is scheduled to be announced by the end of this year.
- Separately, the group’s recent arbitration proceedings to claim
RM438mil in losses against ONGC for variation orders in its 2006 revamp job for
Mumbai High Southfields’ 26 well platforms are likely to be a protracted
affair.
- SapuraKencana’s valuations are currently fair at an FY14F PE
of 16x, above the sector’s 15x. We also do not discount the possibility of
Seadrill disposing of its remaining 6% in SapuraKencana to fund its asset
expansions in Brazil.
Source: AmeSecurities
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