Sapura Energy (SAPE) announced three contract wins with a combined value of RM1.75bn, two of which are from Mexico and one call-out contract from Malaysia (bulk of the contract value). The total order book is currently at RM18bn with ytd contract wins reaching RM7bn, surpassing the FY16 level, which is positive. We maintain our HOLD call and 12-month target price of RM0.35.

Secured 2 EPCTI Contracts in Mexico

SAPE secured two engineering, procurement, construction, transportation and installation (EPCTI) jobs in Mexico awarded by – i) Hokchi Energy S.A. de C.V for Hokchi field development, which is expected to be completed by 1Q 2020, and ii) ENI Mexico for offshore Block Area 1, targeted to be completed by 2Q 2019.

5-year Call-out Underwater Contract in Malaysia

SAPE has also been awarded a 5-year call-out contract to provide underwater services for a few Petroleum Arrangement Contractors (PACs) under Pan Malaysia Package C. These PACs include Sarawak Shell Bhd/Sabah Shell Petroleum Company, Murphy Sabah and Sarawak, Repsol O&G Malaysia, and Kebabangan Petroleum Operating Company. The scope of work includes inspection, maintenance and repair to support all the PACs’ underwater facilities located on the East Coast, Malaysia, and is targeted to be completed by 3Q 2023.

Maintain HOLD

We make no changes to our earnings forecasts. We retain our HOLD call on SAPE with an unchanged SOTP-based target price of RM0.35. Key upside risks include higher contract wins than expected, a better rig utilisation rate, and a stronger US$. Downside risks include further delays in existing work orders, and weaker drilling rig utilisation.

Source: Affin Hwang Research - 22 Nov 2018