News SapuraKencana (“SKPETRO”) announced yesterday
that it had received the extension for its Transportation & Installation
(T&I) project, which was awarded earlier on 24 Dec 2009. The scope of works
for 2013 is approximately RM1.3bn.
To recap, the initial project was for a 3-year
tenure and was expected to expire by end-2012.
Comments We are positive on the extension as it
illustrates that SKPETRO’s grip on the Malaysian T&I space is still strong.
We had already expected an extension in the contract
to later years. However, the scope of works is less than our assumed revenue of
RM1.5bn p.a..
Nonetheless, we expect incoming projects from Australia
to buoy contract flows. Hence, we are maintaining our IPF revenue assumptions
of RM2bn and RM2.1bn for now.
Outlook Positive on merged entity as it boasts
significant scale, global track records and service range, due to its variety
of assets (e.g. tender rigs, pipelay/derrick lay barges/offshore marine vessels
OSV)) and existing strategic
partnerships (e.g. Seadrill, Subsea 7).
Forecast We have incorporated the interest costs
(around RM110m p.a.) that will come from the borrowings for the cash payment to
shareholders. This moderates our FY13-14E net profit forecasts down by 15.6%
and 12.9% to RM598.5m and RM742.0m.
That said, we had already imputed for such
costs during our initiation piece when deriving our fair value for the stock.
Rating
MAINTAIN OUTPERFORM
Valuation Based on an unchanged 18x target PER on CY13 EPS
of 14.7sen, we are keeping our fair value of RM2.63/share.
Risks 1) High capex plans for company industry could
strain balance sheet and growth prospects; 2) High competition as there is a
multitude of players who are highly diversified; and 3) In the event of a
downturn in the global economy and the demand for crude oil and gas, demand for
its services are will be jeopardised.
Source: Kenanga
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