Petronas  has  awarded  the Pan  Malaysia  T&I  contracts  commencing  in CY14  for  a  period  of  3+1  years  to  SAKP.  The  jobs  could  be  worth MYR4bn-5bn  while  its  current  orderbook  amounts  to  MYR23.2bn.  We keep  our  FY14/15/16  earnings  estimates  unchanged  as  the  estimated annual  contributions  from  the  new  contracts  are  within  forecasts. Maintain BUY, with an unchanged FV of MYR4.96.

• Petronas hands out MYR10bn worth of T&I contracts. SAKP’s whollyowned subsidiary, TL Offshore, together with PBJV SB (wholly-owned by Barakah Offshore Petroleum (BARAKAH MK, NR))  and GOM Resources SB (100%-owned by  Puncak Niaga (PNH MK, BUY, FV: MYR5.22),  has secured Petronas’ Pan Malaysia transport & installation (T&I) contracts to provide  services  to  11  production  sharing  contractors.  The  contracts, totaling about  MYR10bn  over a 3-year duration  plus the  option to extend by another year, will commence in CY14.    
• SAKP’s portion potentially  worth MYR4-5bn.  We note  that Petronas’ announcement  did  not specify  the  amount  awarded to  each  contractor. However, Upstream had earlier reported that SAKP’s packages comprise pipelay  and  platform  installation  works  that  require  vessels  with  heavy lifting capacity  of  up to 2,000 tonnes.  Hence, we  expect  SAKP’s portion to be worth some MYR4bn-5bn, depending on the scope of work.   MYR23.2bn-strong orderbook. The group’s current orderbook stands at MYR23.2bn,  excluding  the  latest  contracts.  Jobs  from  Brazil  and Malaysia make  up 55% and 21% of the orderbook respectively, with the remainder  from  Australia (6%), Africa (3%), South-East Asia (14%) and others (1%).
• Addressing debt mismatch. SAKP is still in the midst of restructuring its debt,  which  are  heavily  tilted  towards  short-term  (ST)  borrowings (representing 71% of total borrowings as of October). We understand that the group will restructure  its  ST borrowings  into longer  dated debt  and is exploring  several  alternatives.  Management  is  mindful  as  this  is  key  to maintaining the stock’s shariah status.    
• Maintain  BUY,  MYR4.96  FV.  We  keep  our  FY14/15/16  earnings estimates  unchanged  as  the  T&I  contracts’  estimated  annual contributions  for  the  respective  FYs  fall  within  our  forecasts  for  new contract  wins.  Maintain  BUY  on  SAKP,  with  an  unchanged  FV  of MYR4.96, based on a 22x FY15 P/E. This is  a premium over its regional peers given its strong earnings growth and market dominance.

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Source: RHB