Hong Leong Investment Bank (HLIB) Research and JF Apex Research have kept their 'buy' calls and target prices (TPs) for Sapura Energy Bhd despite the company recently falling into the red for the first quarter ended April 30, 2021 (1QFY22), posting a net loss of RM97.07 million.

HLIB Research said it believed Sapura Energy’s 1QFY22 results were “satisfactory” despite the losses. 

In a report today HLIB Research noted: “Sapura recorded 1QFY22 core loss of RM9.2 million (quarter-on-quarter: -RM76 million, year-on-year: -RM11.5 million), which we deem to be in line with our (FY22f: RM94.1 million) expectations but above consensus’ (FY22f: -RM56.5 million) forecast for FY22 as we expect its results to improve sequentially due to higher oil prices and higher expected earnings from its E&C and E&P division.”

As at 1QFY22, Sapura Energy’s orderbook stands at RM11.8 billion with RM25 billion of bids in progress and RM29 billion in bids already submitted, HLIB Research added. 

It also noted that Sapura Energy will continue to implement its various cost-saving initiatives to improve its margins. 

HLIB Research stated that it is maintaining its FY22-23f earnings forecasts as it believes there will be sequential improvements to Sapura Energy’s results. The local research house is maintaining its "buy" call on the stock and retaining the TP at 15 sen.

“We view that the higher oil prices of late would result in higher work activity for its E&C division and it will directly translate into higher earnings for its E&P division, which is experiencing a pick-up in production volumes. Its drilling division is also expected to remain buoyant, as seen in the current quarter’s results. Going forward, Sapura is planning to take up more gas projects and it is looking to expand more into the renewable wind energy business to prepare itself for the global energy transition into greener fuels,” HLIB Research said.

JF Apex Research is also keeping its earnings estimates for FY22 “in view of improved oil price, better cost control measures and ability to replenish orderbook”.

It added that the 1QFY22 net loss and revenue were below full-year expectation of net profit of RM99 million and revenue forecast of RM7.2 billion.

JF Apex Research has a "buy" call on the stock and a TP of 17 sen. 

At the time of writing, Sapura Energy shares were unchanged at 13 sen, giving the company a market capitalisation of around RM2.07 billion.