Journey to Wealth
SapuraKencana Petroleum - Positive Outlook
We reiterate our Buy call on SapuraKencana. Our fair value is upgraded to RM3.96 (from RM3.76 previously) based on 21x FY01/14 EPS. Similar sized peers such as Bumi Armada are currently trading at 19-20x forward earnings. While it currently has the orderbook to sustain revenues for the next 2.5 years, its enlarged asset base and solid balance sheet allow it to bid for larger and more complex projects moving forward.
Seadrill acquisition to be completed by end-April 2013. Based on our discussions with management during the analyst briefing, we understand that the Seadrill acquisition is on track to be completed by end-April 2013. The EGM is slated to be on the 23rd of April, after which the pricing of the market placement would be determined. We thus expect Seadrill's tender rig business to contribute to the remaining 9M of FY01/14.
Orderbook of RM18.2bn. With an RM18.2bn orderbook, SapuraKencana's earnings visibility remains clear as the current orders are enough to sustain revenues for the next 2.5 years. Currently, the bulk of SapuraKencana's orders are from Malaysia which accounts for 36%, followed by Brazil (29%), SEA (15%) and Australia (10%).
Berantai first gas achieved, targeting more RSCs. SapuraKencana's marginal field RSC, Berantai, has produced first gas and started contribution in 4QFY13. We expect full-year revenue and earnings contributions from the RSC in FY01/14 onwards. When queried, management highlighted that they are interested to bid for more RSCs in the future.
Forecasts. Our FY01/14-15 net profit estimates have been raised by 53-56% as we have imputed the contribution from Seadrill's tender rig business. Investment case. We maintain our Buy call on the stock with a new fair value of RM3.96 (from RM3.76) based on unchanged 21x FY01/14 EPS.
Source: RHB
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