- We maintain our HOLD rating on SapuraKencana Petroleum with a higher fair value of RM2.90/share (from RM2.45/share previously), based on a higher FY16F PE of 14x, on the back of an improvement in sentiments amid the recent stability in crude oil prices.

- The group announced that it has secured contracts in Mexico, Indonesia, Vietnam, and India with a combined value of ~RM969mil (USD269mil). Our earnings are unchanged as this is in line with our new orderbook assumptions of RM6bil-RM8bil for FY16F-FY18F.

- This is the first announced job wins for the year and has raised the group’s orderbook to ~RM26.7bil. This is positive for the groups’ earnings visibility and orderbook replenishment, against the backdrop of a current lower oil price environment.

- The contract details are as follow:-

i) Mexico: Contract for the installation of structures and superstructures of fixed marine platforms, pipelaying and lifting of major power generation equipment worth between USD41.2mil and USD98.1mil. The contract, awarded by Mexican state-owned Pemex, would utilise the DP3 heavy-lift and pipelay vessel SapuraKencana 3500. This is SapuraKencana’s first local operation in Mexico.

ii) Indonesia: SapuraKencana, in consortium with PT Encona Inti Industri of Indonesia, has been awarded by PT PGAS Solution the transportation and installation of 14’x200km of gas pipeline from Kepodang field offshore to an onshore receiving facility in the Muriah PSC, Central Java. The value of the contract is a lump sum fee of USD97.5mil to the consortium.

iii) Vietnam: Contracts for the installation of pipelines for the Phase 1 of Thai Binh-Ham Rong Gas Distribution & Gathering System project, installation of the H5-WHP Topside and pipelines for Te Giac Trang Field Development Project, and installation of offshore facilities for Thai Binh Development Project Blocks 102 & 106.

iv) India: Contract for the provision of transport and installation for the PB Gas Lift Riser Replacement project at the Panna Offshore Field. The collective value of the awards in Vietnam and India is USD73.5il.

- The stock now trades at an FY16F PE of 13x.

Source: AmeSecurities Research - 12 May 2015