Update

Sapura Energy has secured 4 contracts with a combined value of RM815m namely:

• Provision of Pan Malaysia Maintenance, Construction and Modification Contract for ExxonMobil in Malaysia for 5 years with an option for 1-year extension.

• Offshore Installation Works for East Spar Intelligent Pigging and Removal Project for Quadrant Energy (Australia) which is expected to be completed in 4QFY19.

• Provision of Construction Engineering and Offshore Construction of 16” Southern SWAMP Sales Gas Evacuation Pipeline Project for Saidel Limited in Nigeria which is expected to complete by 4QFY19.

• A 1-year extension of contract for provision of a Semi Submersible Tender Assist Drilling Rig “Sapura Pelaut” for Brunei Shell Petroleum starting 1QFY20.

Orderbook – After bagging the above contracts worth RM815m, orderbook is estimated to be around RM16-17b after securing jobs with a total value of RM5.3b so far in FY19.

Earnings Outlook

• Earnings forecast maintained – We are keeping our EPS forecasts as the contract wins are within estimate.

Valuation & Recommendation

• Following the recent surge in share price, we are lowering our recommendation from BUY to HOLD with an unchanged target price of RM0.42 (based on 0.5x P/B and a NTA of RM0.84 per share).

• Its 2QFY19 results to be announced this month is expected to remain lacklustre given the poor performance in the Drilling segment.

• Prospects are expected to be flat until earnings stream start to flow from the SK408 field and activity in the oil and gas industry takes off next year. The SK408 field will come on stream in late 2019. Sapura’s net reserve stands at 253 mmboe (95% gas, 5% oil) that could last for over a decade.

Source: JF Apex Securities Research - 25 Sept 2018