Investment Highlights

• We maintain our BUY call on Sapura Energy (Sapura) with an unchanged fair value of RM0.55/share, based on a 25% discount to our estimated diluted book value of RM0.72/share, assuming completion of the proposed rights issue of up to RM4bil.

• Sapura has secured 3 rig drilling charters and 2 offshore jobs worth RM760mil as follows:

• 2-year charter for semi-submersible tender assisted drilling rig Sapura Jaya to work in Angola from Chevron Corp’s Cabinda Gulf Oil Co Ltd which includes 2 possible extensions of 6 months;

• Charter extension for semi-submersible tender assisted drilling rig Sapura Esperanza Drilling to drill 3 wells off Sarawak for Shell;

• Charter extension for semi-tender assisted drilling rig Sapura Berani to drill 2 more wells at the Sumandak facility, offshore Sabah, from Petronas Carigali Sdn Bhd

• Engineering, procurement, construction and commissioning (EPCC) contract from Petronas Floating LNG 1 (L) Ltd to relocate and tie-in PFLNG Satu (Petronas floating liquefied natural gas) by 3QFY20, currently located in the Kumang Cluster, offshore Sarawak; and

• Additional scope for offshore transportation and installation under the existing contract for the provision of EPCC plus installation for full field development Phase 2 facilities, North Malay Basin from Hess Exploration and Production Malaysia B.V., to be completed by 2QFY20

• Including the US$353mil (RM1.5bil) contract to survey, design, build, transport, install and commission the central processing platform & living quarters of KW-DWN-98/2 project development offshore platform, which was awarded on 6 Dec 2018, Sapura has secured massive new orders worth RM9.3bil for FY19 to date, which translate to 2.3x the RM2.8bil jobs clinched in FY18.

• We maintain FY19F-FY21F earnings as this new award is within our FY19F new win assumption of RM9bil, raising the group’s outstanding order book by 4% to RM17.7bil – 3x FY20F revenues).

• As highlighted in our past reports, Sapura’s order book prospects have improved significantly with the massive new offshore rollouts globally.

• Recently selected as one of Saudi Aramco’s 4 new long-term agreement programme contractors for a 6-year firm period (excluding 2 optional extensions of 3 years), we expect substantive expansions from Sapura’s current tender book of US$8.5bil and prospective bids of US$14.3bil.

• The stock currently trades at half its ex-PBV of 0.5x for a group with a rising order growth momentum.

Source: AmInvest Research - 8 Jan 2019