Results

• Back into the black – Sapura Energy posted a net profit of RM14.2m in 1QFY21 compared with a net loss of RM109m in 1QFY20 due to lower operating cost and lower interest expense.

• Drop in revenue - Quarterly revenue dropped 17% YoY to RM1.36b due to a 20% YoY decline in revenue from Engineering and Construction (E&C).

• Improved QoQ – Sapura’s net income of RM14.2m came against a reported net loss of RM4.24b in 4QFY20 (due to an impairment of RM3.3b in the previous quarter) and normalised net loss of RM950m.

• E&C leads profit growth – Quarterly revenue from the E&C segment dropped 20% YoY but increased 30% QoQ to RM1.12b. The division posted profit before tax of RM124m vs PBT of RM48m in 1QFY20 and loss before tax of RM755m in 4QFY20.

• Drilling division close to breakeven – Quarterly revenue from Drilling improved 5% YoY but dropped 5% QoQ to RM241m with 7 rigs operating and 7 rigs being stacked. The division posted loss before tax of RM15m from a PBT of RM2m in 4QFY20.

• E&P starting to shine - Sapura’s Exploration & Production (E&P) JV, Sapura OMV saw number of barrels lifted more than doubled to 2.4m barrels from 1.1m in 1QFY20 following higher production from SK408 fields. However, average price declined to US$39.4/barrel from US$68.5/barrel in 1QFY20.

• Large orderbook – Sapura’s orderbook stands at RM14b after new contract wins of RM0.8b. Going forward, RM5.7b of the orderbook will be booked in FY21 followed by RM3.7b in FY22 and RM4.6b in FY23 and onwards. However, there could be risk of contracts being cancelled or deferred as well as costs overruns. Going forward, Sapura is bidding for RM27b worth of jobs worldwide including renewable energy projects.

• Higher net gearing – Net debt to equity inched up to 1.05x (from 1.03x in 4QFY20) as cash reserves declined to RM711m from RM772m in 4QFY20. Management is currently on track to refinance its debt amounting to RM10b and unlikely to make any cash call

Source: JF Apex Securities Research - 30 Jun 2020