• Maintain Trading BUY (TP: RM0.06). Sapura Energy turned to profit of RM82mn driven by recovery in E&C segment partly due to gain from reversal of contingency provision. This was above our expectation. The stock price was adversely affected by the auditor’s unqualified opinion with regard to material uncertainty related to going concern in respect of FY2024 financial statement. Nonetheless, we are optimistic that the company is well on track to complete its PN17 regularisation plan amidst the upcycle in O&G development projects. Recent contract wins that boosted its orderbook by 40% to RM7bn further affirm our stance. Hence, we maintain our TRADING BUY recommendation on Sapura Energy with TP RM0.06.

• Key highlights. Revenue rose 11% QoQ and 24% YoY to RM1.2bn mainly driven by stronger E&C segment. EBITDA stood at RM200mn which implies a healthy margin of 17% driven by approved variation orders and reversal of contingency provisions. At PBT level, both E&C and O&M segments recorded profit of RM83.8mn and RM31.7mn respectively. Meanwhile, drilling segment remain in the red with loss of RM77mn in tandem with weaker revenue.

• Earnings forecast. No change to earnings forecast.

• Outlook. Orderbook rose by 40% to RM7bn (4Q24: RM5bn) as it was boosted by a new 5-year contract award for Provision of Pan Malaysia Underwater Services for Petronas and PAC contractors. Meanwhile, unconsolidated orderbook held by its JV and associate entities more than doubled to RM7.1bn following contract award to its 6 pipelay support vessels (PLSVs). On the PN17 regularisation plan, it has submitted an application to regulator to extend the submission date by another 6 month until 30th Nov 2024. To recap, it has obtained the approval-in-principal from majority of its financiers to restructure its debt burden to a sustainable level. It has also entered into SPA with TotalEnergies to dispose its stake in SapuraOMV which form part of its regularisation plan.

Source: BIMB Securities Research - 28 Jun 2024