BAB  is  reported  to  be  eyeing  a  partnership  with  Brazil’s  engineering group, OAS, in relation to  the supply of a FPSO unit to Petrobras. If this materialises,  the  planned  20-year  charter  may  be  worth  MYR0.15-0.18/share, assuming  a  50% stake in the  tie-up. Our  earnings estimates do not reflect  the potential earnings  boost,  as the project is still  being planned. Maintain BUY, with an unchanged FV of MYR4.50.

• News  continues to  flow.  Upstream  reported  last Friday that  Petrobras (PETR3 BZ, NR) was putting the final touches to a tender to be called for the  charter  of  a floating production, storage & offloading (FPSO) unit  to be  deployed  at  the  Tartaruga  Verde  and  Tartaruga  Mestica  fields  in Brazil’s Campos basin. The oil giant will call for tenders on 27 Jan, while the  proposed  closing  date  for  submission  of  bids  is  June.  Petrobras hopes  to  sign  the  charter  deal  by  4QCY14,  targeting  output  from Tartaruga  Verde  in  mid-2017.  The  FPSO  will  later  be  linked  to  oil production wells in the adjacent Tartaruga Mestica field.       
• May involve  USD1bn capex.  BAB was reported to be  keen to  partner Brazilian  engineering  group,  OAS,  to  bid  for  the  said  project.  If  it succeeds,  this  will  be  the  group’s  first  FPSO  in  Brazilian  waters.  The FPSO is required to produce 120,000 barrels of oil per day (bpd), as well as handle 180,000 bpd of liquids and 3.5m cu m per day of natural gas. As  the  contract  is  said  to  span  a  period  of  20  years,  this  leads  us  to believe  that  the  project  may  involve  total  capex  of  at  least  USD800m-1bn. We also believe that the  contract would be  spread over  nine years of  firm  contract  periods,  with  possible  11  one-year  annual  extensions. Assuming a 50% stake in the partnership, BAB’s portion  may  be worth MYR0.15-MYR0.18/share.   
• Maintain  BUY  and  MYR4.50  FV.  We  maintain  our  BUY recommendation on the stock,  with our SOP-based FV at MYR4.50. Our FY13/14/15  earnings estimates  do not reflect any contribution from the said project,  as Petrobras is still  finalising the tender details. We believe BAB  could  secure  at  least  one  other  significant  FPSO  project  that  will involve capex of about USD800m-1bn in FY14.

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Source: RHB