SapuraKencana  (SAKP)  is  said  to  be  close  to  bagging  a  US$280m (RM1bn)  contract  from India’s  Oil  and Natural  Gas  Corp  Ltd  (ONGC)  for Phase 3 of the redevelopment of the Mumbai High South oilfield, reported The  Edge,  quoting  unnamed  sources.  The  engineering,  procurement, construction,  installation  and  commissioning  (EPCC)  contract,  which entails  the  fabrication  of  three  new  wellhead  platforms  and  clamp-on structures,  subsea  pipelines  and  modifications  to  more  than  17  existing platforms, is understood to have been up for grabs in an international open tender.  An  oil  and  gas  industry  sources  says  “It’s  more  or  less  theirs (SAKP). If all goes well, they should officially get the job in a week or two… the parties are said to be ironing out the minor details.” (Source: The Edge)

Comment:  The  US$280m  ONGC  contract  win,  if  materialised,  will  be positive for SAKP. The contract win would mark SAKP’s 2 nd major contract win  announcements  in  2015,  after  its  11 th May  announcement  on US$269m worth of contract wins. We make no changes to our FY16 new contract wins assumption of RM4bn as SAKP’s ytd wins are broadly within our expectations. We opine that current oil-price rally may soon fizzle as supply-demand fundamentals are still negative. In view of a possible nearterm correction in oil  prices and  weak earnings outlook,  we maintain our tactical  SELL  call  on  SAKP  with an  unchanged TP  of  RM2.30  based  on 12x CY16E PE.

Source: Affin Hwang Capital Research - 1 Jun 2015