Journey to Wealth
Sapura Kencana Petro - OUTPERFORM - 25 May 2012
News SapuraKencana ('SKPETRO') announced yesterday that it had received the extension for its Transportation & Installation (T&I) project, which was awarded earlier on 24 Dec 2009. The scope of works for 2013 is approximately RM1.3bn.
To recap, the initial project was for a 3-year tenure and was expected to expire by end-2012.
Comments We are positive on the extension as it illustrates that SKPETRO's grip on the Malaysian T&I space is still strong.
We had already expected an extension in the contract to later years. However, the scope of works is less than our assumed revenue of RM1.5bn p.a..
Nonetheless, we expect incoming projects from Australia to buoy contract flows. Hence, we are maintaining our IPF revenue assumptions of RM2bn and RM2.1bn for now.
Outlook Positive on merged entity as it boasts significant scale, global track records and service range, due to its variety of assets (e.g. tender rigs, pipelay/derrick lay barges/offshore marine vessels OSV)) and existing strategic partnerships (e.g. Seadrill, Subsea 7).
Forecast We have incorporated the interest costs (around RM110m p.a.) that will come from the borrowings for the cash payment to shareholders. This moderates our FY13-14E net profit forecasts down by 15.6% and 12.9% to RM598.5m and RM742.0m.
That said, we had already imputed for such costs during our initiation piece when deriving our fair value for the stock.
Rating MAINTAIN OUTPERFORM
Valuation Based on an unchanged 18x target PER on CY13 EPS of 14.7sen, we are keeping our fair value of RM2.63/share.
Risks 1) High capex plans for company industry could strain balance sheet and growth prospects; 2) High competition as there is a multitude of players who are highly diversified; and 3) In the event of a downturn in the global economy and the demand for crude oil and gas, demand for its services are will be jeopardised.
Source: Kenanga
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
hatifahs
Very good co n worth
to hold tmoro hopefully break the resistnce
2012-05-28 22:31