IT seems that Sapura Energy Bhd will unleash more ‘fire-sale’ in the days ahead following the roll-out of the group’s maiden asset monetisation exercise which is part of the option to improve its liquidity position.

Yesterday (May 30), Sapura Energy announced that its wholly-owned subsidiary Sapura 3000 Pte Ltd has entered into a memorandum of agreement (MOA) with Abu Dhabi-based Safeen Feeder Company-Sole Proprietorship LLC for the disposal of its pipe-laying and crane vessel (Sapura 3000) for US$71.5 mil cash (RM312.8 mil).

Slated for completion by mid-July, the deal is expected to enable Sapura Energy to recognise proceeds from asset disposal of RM308.6 mil, translating to 2 sen/share, and net disposal gain of RM503,700, according to the integrated global oil & gas (O&G) service provider in a Bursa Malaysia filing.

The proceeds will be utilised for working capital and to reduce the group’s borrowings. Based on its FY1/2022 unaudited numbers, the group’s borrowing stood at RM10.6 bil and is expected to reduce by circa 2.9% upon completion of the vessel sale with negligible impact to its core earnings.

Although impact to the group’s earnings from the Sapura 3000 vessel disposal is negligible, needless to say it will provide some much needed temporary financial buffer at the very least.

In the long run, however, PublicInvest Research expects earnings for Sapura Energy to remain weak given the difficulties in cost management for its legacy projects.

“This proposed disposal comes as no surprise as management has indicated its intention of disposing non-core offshore marine assets as part of the group’s focus on long-term sustainability and to improve its liquidity position,” commented analyst Nurzulaikha Azali in a company update.

Nevertheless, the research house upgraded its rating on Sapura Energy to “neutral” (from “underperform” previously) with a revised SOP (sum-of-parts)-based target price of 5 sen (from 3 sen previously) by incorporating the cash proceeds from this transaction.

“In March, Sapura reported headline net loss of RM8.9 bil (core net loss: RM2.2 bil) for the full year FY1/2022. Also, it is still very likely to be classified as an affected issuer – notably Practice Note 17 (PN17) – due to deficiency in its share capital and its viability as a going concern,” cautioned PublicInvest Research.

The group has acted to resolve liquidity challenges, including negotiations with clients of existing contracts with the aim of amicable solutions to recover or limit losses.

It is also in the midst of negotiating with its vendors on outstanding payments as well as lenders through existing or new facilities and under the scheme of arrangement (SOA) while discussion on further asset monetisation is also on-going.

In March, media reports and speculations abound about PETRONAS buying a significant stake in Sapura Energy but was instantly denied by the former who stated that it has always been and will continue to be strictly guided by an established framework for any investment or divestment consideration.

Another recent report has quoted sources familiar with the goings-on at the Ministry of Finance Incorporated (MoF Inc) that they are currently working on a proposal and will step up to offer a helping hand to the group with an assistance package.

“This has undoubtedly lifted investors’ sentiment, with share price up by 183% to 8.5 sen from the year-to-date low of 3 sen. While this is a positive development, sentiment-wise fundamentals of the group remain weak with much more rehabilitation needed,” added PubicInvest Research.

At 9.350m, Sapura Energy was down 0.5 sen or 5.88% to 8 sen with 55.25 million shares traded, thus valuing the company at RM1.28 bil. – May 31, 2022

https://focusmalaysia.my/sapuras-asset-monetisation-commences-but-bleak-outlook-likely-prevails/