Journey to Wealth
Sapura Kencana Petroleum - Mexican Deal Secured
News SKPETRO announced that its 50%-owned JV company, SapuraAcergy had been awarded a contract by Construcciones Maritimas Mexicanas S.A. de C.V. for the charter of Sapura3000 to undertake heavy lifts in the Gulf of Mexico region.
The contract is valued at approximately USD45m (~RM139.5m) and will commence on 18 August 2012 for a duration of 125 days.
Comments We are neutral on the win as the contract sum is marginal versus SKPETRO's total EPCIC order backlog of RM12.4b (which includes Sapura3000's order book).
We have already assumed FY13 and FY14 net JV contributions of RM59.5m and RM75m respectively for the SapuraAcergy JV.
Outlook We are positive on the merged entity for its 1) scale and 2) existing global track record, which will enhance its competitive edge during new contract bids.
SKPETRO is one of the main beneficiaries for new fabrication tenders coming up for the Dulang, Samarang and Bokor fields.
We also do not rule out another marginal field participation given that SKPETRO is one of the domestic oil and gas companies that have the big market capitalisation and skill sets to cater to most of the development stages of the oil and gas value chain.
Forecast We are maintaining our FY13-14 net profit estimates of RM469.1m and RM719.2m respectively.
Rating MAINTAIN OUTPERFORM
Valuation Our fair value remains unchanged at RM2.79/share, (based on 20x PER, a close approximate to the average of the trading PERs of Bumi Armada and MMHE, which are at around 19.0x and 22.6x respectively at this juncture).
Risks High capex plans for the company could strain its balance sheet and growth prospects;
High competition as there are a multitude of players who are highly diversified; and
In the event of a downturn in the global economy and the demand for crude oil and gas, demand for its services will be jeopardised.
Source: Kenanga
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