Journey to Wealth
SapuraKencana Petroleum - New Thai Win
News SKPETRO announced that its wholly-owned subsidiary TL Offshore (TLO) had been awarded a Procurement, Construction and Installation contract for the Manora Field Development in Thailand by Pearl Oil (Amata) Limited.
The contract is worth USD25m (c.RM75m) and is scheduled to commence in Sept-12 with completion in early-CY14.
Works for this contract will be carried out in a consortium with a subsidiary of Clough Limited (Clough (Thailand) Co. Ltd) ' CTL, where CTL will undertake the procurement and fabrication and TLO will undertake the transportation and installation.
Comments We are positive on the win as it showed that SKPETRO's global reputation is established enough to consistently win contracts.
However, we are neutral on its impact to our earnings estimates as the contract sum is marginal
versus SKPETRO's total EPCIC order backlog of RM9.2b.
We have already assumed around RM2.1b in new contract executions for TLO and Clough's divisions in FY14, which will accommodate the new contract.
Outlook SKPETRO's strong presence and scale in the EPCIC market, both domestically and globally makes it a prime suspect for securing further contract wins.
Its latest order book is at RM14.5b while the bid book stands at RM25b.
Forecast We are maintaining our FY13-14 net profit estimates of RM495.6m and RM719.2m respectively.
Rating MAINTAIN OUTPERFORM
Valuation Maintaining our fair value of RM2.80 based on an unchanged PER target of 20x on CY13 EPS. Premium valuations are accorded to the stock (versus 15x for the sector average and 18x for MMHE) due to its significant domestic market dominance and service scale range.
Risks 1) High capex plans for the company 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 will be jeopardised.
Source: Kenanga
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