We maintain our Buy
call on SapuraKencana with an unchanged fair value of RM3.76. We remain
positive on SapuraKencana’s earnings outlook, underpinned by its extensive
oilfield service capabilities, which allows it to undertake major oilfield
services contract, overseas and locally. Completion of its tender rig business
would provide further earnings upside of approximately 18-20% in FY01/14. The
deal is expected to be completed by 2Q CY2013. SapuraKencana is our top pick
for big cap O&G service providers.
Within expectations.
SapuraKencana’s 4QFY01/13 core net profit of RM123.9m brought full-year FY01/13
core profit to RM482.7m. This is in line with our and consensus estimates,
accounting for 97% and 98% of our and consensus estimates respectively. Revenue
grew by 44.1%, driven mainly by its offshore construction and subsea division
(OCSS).
Margins were weaker.
PBT margins contracted by 7.4%-pts yoy, although this is was mainly due to: 1)
one-off merger costs of approximately RM130-140m; and 2) higher interest
expense due to the debt undertaken to finance the merger. We expect margins to
recover in FY01/14, as the synergies of the merger are realised as
SapuraKencana continues to execute more contracts.
Expect more Malaysian
contracts in FY01/14. We believe SapuraKencana is one of the main
beneficiaries of Petronas’ 5-year RM300bn capex commitment due to its scale and
capabilities. Furthermore, given that it has achieved first gas for Berantai,
we expect it to bid for more marginal field RSC’s. Petronas is expected to award
more RSC’s this year as it only awarded one (KBM cluster) in 2012.
Forecasts. No
change to our earnings forecasts pending its analyst briefing later today.
Investment case.
Our fair value is unchanged at RM3.76, based on 21x pro-forma FY01/14.
Source: RHB
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