News

• Sapura Energy (SAPNRG) announced that it has been awarded multiple contracts with a combined value of RM905m.

• The awards consist of: (i) EPCC of Kinarut ERB WEST Compressor Upgrading Project for Petronas Carigali; (ii) EPCC for Bokor Betty Brownfiled & Rejuvenation for Petronas Carigali; (iii) EPCC+I for FFD Phase 2 Facilities, North Malay Basin by Hess Exploration and Production Malaysia; (iv) T&I works for Bokor CPP Project by MMHE; and (v) Offshore/ Onshore Pipeline and Terminal Works for Fifth Oil Berth Project by Mumbai Port Trust.

• The firm contract period of these contracts varies from 1 year to 4.5 years, spanning until FY23.

Financial Impact

• This is deemed within our expectations as the combined value of secured contracts fall within our FY19F orderbook replenishment assumption of RM3bn.

• The contracts would bring its orderbook to c.RM16bn.

• Overall operating margin for these contracts would be at 8- 11%, consistent with the group’s recent reported numbers.

• Slight positive to the E&C division of the group as the contracts would help to improve utilisation of its underutilised fabrication yard and T&I vessels.

Risks

• Execution risk;

• Prolonged low oil price;

• Low rig utilisation.

Forecast

• Maintained as contracts win is within assumption.

Rating

UNDER REVIEW

• We put our rating on Sapura Energy UNDER REVIEW pending our meeting with management next week where we hope to obtain further clarity on the near-term prospects for the company.

Valuation

• Our previous TP of RM1.56 was based on 0.7x FY19 PBV multiple.

Source: Hong Leong Investment Bank Research - 6 Feb 2018