SapuraKencana Petroleum; Buy; RM4.56
Price Target: RM5.55; SAKP MK

SAKP announced that its drilling subsidiaries have been awarded a new contract and three contract extensions totalling US$454m (~RM1.5bn):

i) Semi-tender assist rig, SKD Berani – 1-year contract + 1-year extension worth US$108m in Congo from Apr14, implying daily charter rate of US$148k

ii) Semi-tender assist rig, SKD Pelaut – 2-year extension contract worth US$92m in Brunei from Apr15, implying daily charter rate of US$126k

iii) Tender assist rig, SKD Setia – 2-year extension contract worth US$164m in Angola from Aug14, implying daily charter rate of US$225k

iv) Tender assist rig, SKD T-12 – 2-year extension contract worth US$90m in Thailand from Mar14, implying daily charter rate of US$123k

The contracts will increase SAKP’s order book to RM27bn, of which 17% (or RM4.5bn) comes from the drilling segment. We are positive on the contract wins given the strong demand for SAKP’s quality fleet of 21 tender rigs (3 under construction) which is also the largest in the world.

We maintain our earnings forecast for now, as we had earlier assumed full utilisation for the rigs. We reiterate our BUY rating with RM5.55 TP, based on 22x FY15 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 - 2 Apr 2014