INVESTMENT HIGHLIGHTS

• Sapura Energy ended its 1QFY19 results in the red at – RM108.2m

• Bulk of losses attributable to Drilling segment at – RM68.7m

• EBITDA positive at RM228m

• Year-to-date new wins approximately RM4.5b

• Current order at approximately RM16.7b

• Maintain TRADING BUY at unchanged TP of RM1.01

Challenging first quarter. Sapura Energy reported 1QFY19 losses of –RM135.7m. This is premised on revenue level of RM1.1b. The losses mainly stem from the Drilling segment. However, EBITDA recorded healthy levels of RM228m.

Heavy Engineering. Segment revenue remained flat q-o-q at RM665.6m but segment profit declined to RM36.5m. The lacklustre earnings are a result of low revenue and earnings recognition from the projects which are currently at hand. 1QFY19 segment operating margin is at 5.55% while segment EBITDA margin is at 8%.

Drilling. 1QFY19 segment revenue remained weak at RM183.4m while registering an operating loss of –RM68.7m. This is largely due to low utilisation rate of approximately 33% (this was guided earlier is previous reports). Despite this, the segment however recorded healthy EBITDA margin of 57%.

E&P. Segment revenue performed relatively well at RM209.8m while maintaining segment profitability as 1.1mmboe was lifted in 1QFY19 compared with 0.8mmboe in 1QFY19. The average crude lifting price was at USD70pb while EBITDA breakeven cost is at USD30-35pb.

Orderbook. Group orderbook is currently at RM16.7b, marking an inflection from FY18 low for the past four years. Out of these, approximately RM5.2b and RM3.8b are expected to be recognised in FY19 and FY20 respectively, while the remaining RM7.7b is to be recognised in FY21 onwards. The company’s bidbook, including prospects is at USD13.1b.

Source: MIDF Research - 2 Jul 2018