(SAPE MK/SELL/RM1.71/Target: RM1.32)

SAPE’s 1HFY18 core loss missed expectations. With a lack of optimism in management’s earnings guidance, we slash our forecasts by 70% on more concerns: a) rig losses may widen on only five working rigs (the 6th rig was partially utilised in 2QFY18), b) peak JV earning base from PLSV in 1QFY18 may not sustain, and c) significant FY18F orderbook replenishment gap. Our valuation has already assumed O&G prices of US$49-55/bbl. Maintain SELL, and cut target price slightly to RM1.32.

Source: UOB Kay Hian Research - 28 Sept 2017