SapuraKencana Petroleum; Buy
Price Target: RM4.20; SAKP MK

SAKP announced that it has secured a contract award from ExxonMobil Exploration and Production Malaysia Inc. for the provision of hook up, commissioning (HUC) and topside maintenance services. The 5- year contract which comes with a 1-year extension option is estimated to be worth between RM300m-500m.

The HUC contract is a testimony to SAKP’s integrated services which encompass the full value chain of O&G offshore services. While the contract is SAKP’s first major order win for the year, we expect contract flows to pick up in 2H13, in tandem with the robust O&G activities in Malaysia. We estimate that SAKP’s order book stands at RM18bn, which will provide earnings visibility for the next 3 years.

There is no change to our earnings forecast as the contract only translates to RM60m-100m annual incremental revenue to the group. We maintain our Buy rating with RM4.20 TP (based on 22x FY14 EPS). We continue to like SAKP as its unrivalled integrated offshore services will naturally place it among the frontrunners for bidding of mega projects in Malaysia.

Source: HwangDBS Research - 28 May 2013