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SapuraKencana Petroleum - 4Q13 within expectations

kiasutrader
Publish date: Fri, 22 Mar 2013, 09:26 AM
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Period  4Q13/12M13

Actual vs. Expectations  The 4Q13 core net profit of RM123.9m brought the core FY13 net profit to RM482.9m. This was within our expectations at 97.3% of our full year net profit estimate of RM496.3m. However, it was below (at 85%) the consensus expectation of RM568.2m.

 The core net profit excludes the RM42m one-off gain adjustment (recognised in 3Q13) arising from the additional investment in Quippo-Prakash.

 Note that we have included Kencana Petroleum's estimated 12MFY12 earnings to arrive at our SKPETRO's 4QFY12 and 12MFY12 figures for a more meaningful YoY comparison and analysis.

Dividends  No dividend was declared as expected.

Key Results Highlights  QoQ, the revenue fell (-11.6%) mainly due to lower offshore construction and subsea services (OCSS) works in the quarter. The net profit was also down (-12.1%) mainly due to weaker margins from all its divisions, mainly from OCSS. The sluggish showing within the quarter is expected as the company's offshore operations are seasonally weaker during the monsoon season.

 YoY, while the revenue was up (77%), net profit was down (7.8%) mainly due to: 1) a higher interest cost and 2) lower margins at the Energy and Joint Ventures (EJV) division due to more manpower hiring.

Outlook  SKPETRO's strong presence and scale in the domestic EPCIC market both domestically and globally makes it a prime candidate for securing further contract wins.

 The impending Seadrill asset injection is expected to increase the group's net profits further.

Change to Forecasts  We are maintaining our earnings estimates for now pending the company's analyst briefing tomorrow.

Rating   MAINTAIN OUTPERFORM

Valuation  Maintaining our fair value of RM3.82 based on an implied targeted CY13 PER of 26.5x.

 Recall that we had tactically raised our target price earlier to accommodate the potential earnings accretion from the new rigs of SKPETRO post its acquisition exercise with Seadrill. The premium valuation accorded to the stock (versus 15.0x for the sector average and 18.0x for MMHE) is due to its significant domestic market dominance and service scale range.

Risks  1) High capex plans for the company could strain its growth prospect and 2) delay in contract executions could result in lower than expected earnings.

Source: Kenanga
SAPNRG (5218)
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