Sapura Energy Bhd’s earnings is expected to continue to improve in Q4FY20 as engineering and construction (E&C) jobs progress to the backend stages which book higher portion of profit while the drilling division will see two more rigs in operation.

JF Apex Securities in its latest market update on Sept 30 said while FY21 will be driven by its Exploration and Production (E&P) JV as first gas from the SK408 is expected in end-CY2019.

Sapura Energy narrowed its net loss to RM116m in 2QFY20 compared with a net loss of RM199m for the same period in FY19 due to improvement in both Engineering & Construction and Drilling divisions.

Its revenue for that quarter jumped 87% YoY to RM1.9b due to higher revenue in both E&C and Drilling.

The research house said after securing new jobs worth RM3.1b so far this FY, Sapura Energy’s order book was steady at RM16.3b vs RM17.3b last quarter.

Going forward, it expects RM4.2b of Sapura Energy’s order book will be booked in the remainder of FY20 followed by RM5.3b in FY21 and RM6.8b in FY22 and onwards.

Sapura is bidding for RM34b worth of jobs worldwide with more than half of its bid book coming from the Middle East & Africa region.

JF Apex also noted on the new contracts and contract extensions worth RM774m awarded to Sapura Energy that includes Engineering, Procurement, construction and Installation (EPCI) works for the Salman Project in Brunei from FY20 to FY23; Procurement, Construction, Hook up and Commissioning works for Bardegg-2 and Baronia enhanced oil recovery (EOR) development project for Petronas Carigali expected to be completed by 3QFY20 and tender assist drilling rig Sapura T-17 in Thailand for 1 year commencing 1QFY21.

Other contracts mentioned was the contract amendment and extension for the semi-submersible tender-assist drilling rig Sapura Berani by Petronas Carigali that is expected to be completed by 2QFY21 and contract extension for the semi-submersible tender-assist drilling rig Sapura Pelaut for 1 year from Brunei Shell Petroleum Company.

The research house is keeping its recommendation at BUY with an unchanged target price of RM0.50 based on 0.5x P/B and a NTA of RM1.00 per share.

Sources: Linkedin Azlan Abu Bakar