Sapura Energy (SAPE) announced that it has secured a total of 5 contracts (split into 4 Malaysian and 1 Indian contracts) worth a combined value of RM905m. We make no changes to our earnings forecasts as these form part of our orderbook replenishment assumption. We also maintain our SELL rating with an unchanged target price of RM0.73 based on our SOTP valuation methodology.

Contract Details

SAPE secured a total of 5 (4 Malaysian and 1 Indian) contracts worth a combined value of RM905m. The work scope for the Malaysian batch of contracts include 1) EPCC of Kinarut ERB West Compressor upgrading project for Petronas Carigali for 3 years (target completion by 4Q20), 2)

EPCC for Bokor betty brownfield & rejuvenation by Petronas Carigali for 4½ years (target completion 2Q20), 3) EPCC and installation for FFD Phase 2 facilities, North Malay Basin by Hess (target completion 2Q20), and 4)

transportation and installation for Bokor CPP by MMHE (target completion March 2020). Meanwhile for its contract in India, SAPE has secured a contract to undertake the offshore/onshore pipeline and terminal works for a fifth oil berth project by Mumbai Port Trust, which is expected to be completed by May 2019.

Maintain SELL

This is the first contract win secured by SAPE in FY19 (FYE Jan). Adding these to the latest orderbook, we estimate current outstanding orderbook to be around RM16bn. We make no changes to our earnings forecast as this batch of contracts fall under part of our orderbook replenishment. We maintain our SOTP-derived TP at RM0.73 and SELL call for the time being.

Risks to Call

Upside risks to our call include (i) quicker recovery in contract awards, (ii) stabilization at higher oil price levels, and (iii) higher demand for rigs.

Source: Affin Hwang Research - 6 Feb 2018