Journey to Wealth
SapuraKencana Petroleum - Extending T-6 rig charter rate HOLD
- We maintain our HOLD recommendation on SapuraKencana Petroleum (SapuraKencana) with an unchanged fair value of RM2.60/share, pegged to an FY14F PE of 18x' 20% above the oil & gas sector's 15x currently.
- SapuraKencana has announced that the charter of its T-6 self-erecting tender rig to Carigali PTTEPI Operating Company Sdn Bhd (CPOC) has been extended by 3 months from 21 April 2013 to 20 July 2013 for US$9mil or RM102k/day, slightly higher than the existing charter rate of RM100k/day. Hence, we retain SapuraKencana's FY13F-FY15F net profit.
- Recall that the original T-6 contract was for an initial duration of 28 months commencing from 21 December 2010 and expiring on 21 April 2013. Apart from the primary period, there was an option for two extensions of three months each, which means that CPOC can further extend the charter to 21 October 2013.
- The group currently has 6 tender-rigs operating offshore Malaysia and Thailand. The group wholly owns KM-1 and retains a 51% stake in the other five rigs with Seadrill having the remaining stake.
- For the rest of the year, we expect a higher magnitude of newsflow for hook-up, construction and commissioning (HUCC) works vs. pure fabrication jobs.
- The tenders which the group is bidding for include the RM8bil-RM10bil Pan-Malaysian umbrella HUCC contract and RM600mil subsea maintenance job, which is scheduled to be announced by the end of this year.
- But the large central processing platform and multiple wellhead platforms for the North Malay gas basin Phase 2 development, and Bokor, Dulang and Semarang fields may only materialise next year.
- SapuraKencana's valuations are currently fair at an FY14F PE of 16x, which is at a 5% premium to the sector. We also do not discount the possibility of Seadrill disposing of its remaining 6% in SapuraKencana to fund its asset expansion in Brazil.
Source: AmeSecurities
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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....
