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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 26 Sep 2018, 09:44 AM

 

Sapura Energy Behad - Building Up Orderbook

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Sapura Energy reported that it has secured a string of contracts across the upstream value chain in four different countries – Malaysia, Australia, India and Mexico with a combined value of RM1.8bn. These contract wins are undoubtedly positive to the Group, and affirms managements’ abilities in securing more contracts while strengthening its footprint globally. Including the RM2.7bn worth of contracts already secured earlier this year, this latest round pushes its balance orderbook in hand to RM18.4bn, which will keep them busy over the next three years. We make no adjustment to our estimates, having already accounted for it in our yearly replenishment assumption of RM6bn. Share price has dipped 15.5% YTD despite its promising longer-term prospects, which we gather could be due to market expectations of weak numbers in the upcoming quarterly results. Our Trading Buy call is retained nonetheless, with an unchanged sum-of-parts TP of RM1.11.

  • The contracts. There are nine new contracts across four countries (Malaysia, Australia, India and Mexico) in the upstream value chain, with a combined value of RM1.8bn. Details are in Table 1.
  • Orderbook jumped to RM18.4bn. The new contracts of RM1.8bn bring wins to-date to RM4.5bn, translating to 75% of our FY19 orderbook replenishment assumption. This has consequently pushed its balance orderbook in hand to RM18.4bn, c. 3.6x of its FY18 E&C and drilling segment revenue.
  • Financial impact. We keep our estimates unchanged as we have assumed these contracts in our annual orderbook replenishment assumption of RM6bn. Project margins could vary at mid-to-high single digit levels.
  • Other updates. We note that the Group’s tender book has grown from RM2.5bn in FY17 to RM5.1bn at present with additional prospects of close to RM8bn for this year. This suggests that global oil and gas activities are starting to pick-up on account of stability in oil prices at above USD60/bbl.
  • Results preview. While expecting 1QFY19 numbers to still be weak due to expected losses in its drilling segment, we maintain our forecasts at this juncture pending result release next week. On the de-gearing plans, the initiatives will include the potential listing of its E&P business and also asset monetization.

Source: PublicInvest Research - 22 Jun 2018

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