Sapura Energy (SapE) announced that it has been awarded multiple contracts for all segments in five different countries across the Asia Pacific and Atlantic Regions – Malaysia, Thailand, Australia, New Zealand and Republic of Congo, with a combined value of c.RM1.4bn. Although contract wins will ensure visibility to the Group’s topline numbers for the next few years, we remain cautious on the execution of the projects however given its liquidity constraints to cater to such sizeable contract values despite some clients possibly providing advances to ensure the successful completion of the projects. Having said that, we estimate the Group’s existing orderbook has surged to RM7.0n after adding the new contracts to its 4QFY23 orderbook of RM5.6bn. Notably, the Group has been granted a 3rd extension with regard to its debt restructuring exercise, and is also in the midst of seeking extension from regulators for submission of PN17 regularization plan. We retain our Underperform call and TP of RM0.02.

• 3rd extension restraining order. The Group has been granted another lifeline from the High Court after it received the 3rd extension of restraining order until March 2024. Notably, amongst basic principles in the Scheme of Arrangement (SoA), the Group is expecting to receive RM1.8bn injection from the White Knight via subscription of redeemable convertible loan (RCLS) for the settlement of ~RM1.5bn unsecured creditors. Meanwhile, a portion of secured creditors will be converted to equity or equity-linked instruments to be issued on a Group-wide basis.

• Update on PN17. Due to the RM3.0bn negative equity as at FYE Jan 2023, it is expected that the Group requires extension of time for submission of its PN17 regularization plan, with the initial deadline supposed to be 31st May 2023. Although we expect further lifeline to be granted in coming weeks, we believe the regularization plan would be an uphill task to execute and may require divestment of some valuable assets or businesses.

Source: PublicInvest Research - 9 Jun 2023