• Kencana Petroleum (Kencana) and SapuraCrest Petroleum
(SapCrest) have mutually agreed to extend the completion of their merger into
SapuraKencana Petroleum (SapuraKencana) from 30 April 2012 to 31 May 2012 to
accommodate documentary submissions and a High Court hearing date which we
understand has been set for 18 April 2012.
• The two companies indicated that the completion of the
proposed capital distribution of RM1.8bil, merger and subsequent listing of
SapuraKencana is expected to be completed by 2Q2012. This development is not a
surprise as we had earlier indicated in our reports that the merger is likely
to be completed by the end of May this year.
• Currently, the shareholders of both companies have
approved the proposed merger. Hence, we do not expect the family dispute in
SapuraCrest’s main shareholders to derail the completion of the deal. The Edge
Financial Daily reported yesterday that Tan Sri Shamsuddin Kadir had filed a
legal challenge in the High Court to demand the return of shares and properties
valued over RM450mil from his two sons – SapCrest’s executive vice chairman
Datuk Shahril Shamsuddin and non-executive director Shahriman Shamsuddin. The
assets include a 15% stake in Sapura Holdings Sdn Bhd and properties in the
Klang Valley and Selangor. Sapura Holdings, via Sapura Technolgy Bhd, has a 40%
stake in SapCrest.
• Recall that the merger will transform Malaysia’s O&G
services as the resulting entity will have a dominant 70% market share of
offshore installation work with stakes in four derrick lay vessels (with five
pipe-lay/derrick vessels under construction), sole tender rig owner/operator
with a fleet of 6 units and one of only two major fabrication yards (the other
being Malaysia Marine & Heavy Engineering Holdings) in the country. Other
services include marine services, via a fleet of 9 diving/support vessels,4 survey vessels, 6 remote-operated vessels, 4
accommodation workboats and four anchor-handling tug supply vessels.
• SapuraKencana’s order book of RM13.5bil remains the
largest in the country, larger than Bumi Armada’s RM10bil which includes RM3bil
renewable options. With a yard utilisation of only 50% currently, Kencana’s
order book is still set to grow with a tender book of RM5bil-RM6bil, of which
over 55% stems from Australia’s huge offshore gas fields and the rest from Malaysia.
Additionally, both SapCrest and Kencana are jointly bidding for over RM1bil
tenders for engineering, procurement, construction, installation and
commissioning (EPCIC) projects in Southern China.
• SapuraKencana’s potential market capitalisation of over
RM12bil would rival Bumi Armada’s and will likely lead to its inclusion in the
FBMKLCI and MSCI indices. As foreign institutional investors are still in the
low teens for the two companies, the inclusion in the major indices will
naturally likely retain the group’s premium valuations at over 20x.
• Besides additional contract newsflow, the group is still
eager to secure two additional risk-sharing marginal field contracts, similar
to Berantai. Hence, we maintain BUYs for both Kencana and SapCrest. But our top
pick remains MMHE – laggard with muted expectations – but could surprise on
fresh order newsflows.
Source: AmeSecurities
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