We reiterate our Buy
call on SapuraKencana. Our fair value is upgraded to RM3.96 (from RM3.76
previously) based on 21x FY01/14 EPS. Similar sized peers such as Bumi Armada
are currently trading at 19-20x forward earnings. While it currently has the
orderbook to sustain revenues for the next 2.5 years, its enlarged asset base
and solid balance sheet allow it to bid for larger and more complex projects
moving forward.
Seadrill acquisition
to be completed by end-April 2013. Based on our discussions with management
during the analyst briefing, we understand that the Seadrill acquisition is on
track to be completed by end-April 2013. The EGM is slated to be on the 23rd of
April, after which the pricing of the market placement would be determined. We
thus expect Seadrill’s tender rig business to contribute to the remaining 9M of
FY01/14.
Orderbook of
RM18.2bn. With an RM18.2bn orderbook, SapuraKencana’s earnings visibility
remains clear as the current orders are enough to sustain revenues for the next
2.5 years. Currently, the bulk of SapuraKencana’s orders are from Malaysia
which accounts for 36%, followed by Brazil (29%), SEA (15%) and Australia
(10%).
Berantai first gas
achieved, targeting more RSCs. SapuraKencana’s marginal field RSC,
Berantai, has produced first gas and started contribution in 4QFY13. We expect
full-year revenue and earnings contributions from the RSC in FY01/14 onwards.
When queried, management highlighted that they are interested to bid for more
RSCs in the future.
Forecasts. Our
FY01/14-15 net profit estimates have been raised by 53-56% as we have imputed
the contribution from Seadrill’s tender rig business. Investment case. We
maintain our Buy call on the stock with a new fair value of RM3.96 (from
RM3.76) based on unchanged 21x FY01/14 EPS.
Source: RHB
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