SKPETRO's margin was affected by the timing of recognition, one-off merger costs, Seadrill acquisition ongoing costs and higher borrowings. Management guided that the lower YTD PBT margin (12.0% versus 12.4% in FY12), which fell despite the increase in revenue, was mainly due to: (i) timing issues (where SKPETRO could only recognise eight months of Kencana's earnings due to the merger accounting method) and (ii) also due to other higher costs incurred i.e. the one-off Sapuracrest and Kencana merger cost (RM54m recognised in 4QFY13), the Seadrill acquisition cost of RM46m and a higher borrowings cost in the year given its aggressive newbuilding scheme. The merger cost should not recur in FY14. However, there will continue to be some Seadrill acquisition costs given that the exercise is not completed as yet.

Berantai made maiden contribution in 4QFY13. We understand that the Berantai field made its maiden contribution in 4QFY13 after having achieved its first-gas in Oct-12, which also drove the higher EJV division's revenue/profit in 4QFY13. Management has guided for a full year contribution from FY14 onwards.

Updates on the Seadrill tender-rig acquisition. Management hopes to conclude the acquisition by May-CY13, which would mean a nine-month contribution for FY14. On the overall, management seemed excited about the acquisition as: 1) it foresees that the business will expand SKPETRO's global footprint (i.e. to countries like Angola, Trinidad and Tobago) and 2) believes that the applications for the tender-rigs could expand (i.e. beyond just the shallow-water application), thus creating more opportunities for the group.

Source: Kenanga