-  We maintain BUY on SapuraKencana Petroleum (SapuraKencana), with an unchanged fair value of RM5.70/share, based on an FY15 PE of 25x, which is the 2007 peak achieved by Kencana Petroleum.

-  The group has announced that it has secured contracts worth RM393mil (US$124mil) as follows:

 i) Wholly-owned TL Offshore’s US$89mil to provide transportation and installation services for a 151 kmoffshore pipeline under the Nam Con Son 2 Gas Pipeline Project – Phase 1. This will be carried out over 2 campaigns in 3Q2014 and 2Q2015 in the Nam Con Son field, which is 19 km to the Dai Hung field located at South West of Nam Con Son Basin and 260km from Vung Tau, Vietnam.

ii) TL Offshore’s US$7mil subcontract from PTSC Offshore Services Joint Stock Company to install the Te Giac Trang Field H5 Wellhead Platform Jacket and Drilling Wellbay Module I located in Block 16-1, Offshore Vietnam.

iii) 50%-owned SapuraAcergy’s US$28mil contract to provide transport and installation services for a compressor module and a condensate pump module onto the 'Yolla A' platform, which is located in Yolla Field, Bass Strait, Australia from Origin Energy Resources Limited. The engineering activities for the works have already commenced while the offshore installation campaign over an estimated 8 days is scheduled to commence in 4Q2014.

-  These contracts have raised the group’s new orders secured to date this year by 6% to RM6.5bil. Of these, 73% of the new orders secured this year stem from tender rig charters.

-  As this is well within our estimates, we maintain our forecasts which have already assumed RM9bil-RM12bil in new order assumptions annually.

-  The increasingly visible pipeline of new contracts in offshore construction and its fresh tenders of RM30bil underpin the group’s strong earnings outlook.

-  The group’s outstanding order book stands at RM30bil (2.7x of FY15F revenue) and remains the largest within the O&G sector – above Bumi Armada’s firm orders of RM23bil.

-  The stock still trades at an attractive FY16F PE of 17x currently – a 41% discount to SapuraCrest Petroleum’s peak of 29x back in 2007.

Source: AmeSecurities