• Overview. Reservoir Link Energy (RL) swung into losses of RM3.3mn in 2Q22 from PATAMI of RM4mn in 2Q21 mainly due to a one-off FV loss of other investment of RM2.2mn as well as delayed projects in both oil and gas and RE segments. Revenue declined by 40% YoY to RM17mn due to the completion of perforation, wash and cement (PWC) project in Mauritania in October 2021. However, it was still a better QoQ with revenue more than double whereas core LATAMI reduced by 61% to RM1.1mn from RM3mn in 1Q22.

• Key highlights. The company recorded a core loss of RM4.4mn in 1H22 following 2 straight quarter losses. This is weaker than RM4.1mn PATAMI in 1H21. The company recorded zero revenue from PWC segment in 1H22 following the change in schedule of the plug and abandonment activity (P&A) at M3 field. The PWC scope of work for the project (which was awarded to RL by Tanjong Offshore) was initially scheduled to begin on 28th February 2022.

• Against estimates: Inline. We deem the 1H22 performance as within our estimate in expectation of earnings recovery in 2H22.

• Outlook. We expect activities to pick up in 2H22 including the progress of M3 field P&A project. No change is made to our FY22 earnings forecast at this juncture despite the losses in 1H22. Hence, we still expect the company to end FY22 with a core PATAMI of 5.9mn.

• Our call. Maintain a BUY call on RL with unchanged TP of RM0.52 as we pegged 13x to FY23F P/E.

Source: BIMB Securities Research - 30 Aug 2022