T7 Global (T7) 1Q23 profits rose 56% YoY to RM4mn mainly driven by ongoing 10-well abandonment activities at M3 oilfield for Petronas. Earnings should be higher if Bayan MOPU could recognise its standby rate amidst delay in operation. Regardless, the first gas from the field is still expected to come by end 2Q23 which will provide a significant boost to earnings. Hence, we maintain our BUY call on T7 with unchanged TP RM0.50.

• Within expectation. 1Q23 earnings of RM4mn were within our estimate despite only making up 12% of our full year forecast. This is because we have factored in earnings contribution from Bayan MOPU that will begin in 2Q23.

• Dividend. No dividend is declared as expected.

• QoQ. Revenue declined by 45% to RM94mn mainly due to lower offshore maintenance activities during the quarter. However, stable revenue from on-going well abandonment activities for M3 oilfield has partially cushioned the impact. Similarly, PATAMI declined 63% in tandem with revenue.

• YoY. Revenue and PATAMI rose 52% and 56% respectively mainly due to ongoing well abandonment activities

• Outlook. The company maintained its guidance that Bayan MOPU is expected to receive its first gas by end 2Q23. 2Q23 earnings will be further boosted by the construction progress of KLIA baggage handling system (BHS) contract which already reached 12% completion. Its aerospace segment also saw a pickup in orders and the company expects to achieve RM10mn in revenue in FY23. Overall, T7’s orderbook stood at RM2.5bn as at end 1Q23 (4Q22: RM2.6bn) which is comprised of (i) long-term lease charter and operation and maintenance contracts of 2 MOPUs, (ii) integrated well services (IWS) for well abandonment and well workover operation and (iii) offshore platform maintenance contract. It is also bidding for new jobs worth RM2bn.

• Our call. We maintain T7 as a BUY with an unchanged TP of RM0.50. We remain optimistic with the stock given its track record in offshore maintenance services as well as new income growth from MOPU assets.

Source: BIMB Securities Research - 25 May 2023