• T7 Global announced that it has been appointed by Petrofac Malaysia as its MCM contractor. This is part of Package B3 which also includes other field operators including IPC Malaysia and Jadestone Energy.

• We see the advantages of the contract as multipronged: (i) expanding its market share in the MCM space, (ii) allow it to achieve economies of scale, and (iii) zero disruption risk from ongoing conflict between Petronas and Petros.

• We raised our FY24-26F forecast by 10-26% as we imputed RM1.7bn orderbook assumption for MCM contracts, making up c.40% of RM4.5bn remaining orderbook.

• While the company’s heavy-capex business model could be strained by its prevailing high gearing ratio, the orderbook expansion from offshore maintenance activities will provide another room for growth, in our view.

• Maintain T7 Global as a BUY with a higher DCF-derived fully diluted TP of RM0.69 (from RM0.62).

Secured Maintenance Jobs from Petrofac

T7 Global announced that it has secured a letter of award from Petrofac (Malaysia-PM304) Limited for the provision of Pan-Malaysia Maintenance, Construction, Modification (MCM) and Hook-up & Commissioning (HUC) for Package B3. The contract commenced effectively on 30th Oct 2024 until 22nd Sep 2026. Note that the company previously has secured similar MCM works from Jadestone Energy and IPC Malaysia under the same Package B3.

Expanding Market Share in Peninsular Malaysia

We are positive with this announcement as this will expand its market share within maintenance space. Notably, the company will replace Barakah Offshore who was the former MCM contractor for the same work scope. Besides that, it can also achieve economies of scale by servicing multiple clients that operates oil and gas fields nearby to its new fabrication yard located in Kemaman, Terengganu. On top of that, there will be minimal disruption to the work flow as the area is not affected by the conflict between Petronas and Petros.

Change to Earnings Forecast

The announcement did not specify the value for this contract. However, we understand that this is already accounted in its remaining orderbook worth RM4.5bn. We take this opportunity to revisit our earnings forecast by imputing orderbook assumption of RM1.7bn for MCM contracts. This makes up c.40% of total orderbook. Consequently, we raise our FY24-26F earnings estimate by 10-26% (Table 3) which imply an earnings growth of 49% CAGR to RM101mn.

Maintain BUY with higher TP of RM0.62

We maintain T7 Global as a BUY with a higher DCF-derived TP of RM0.69 (from RM0.62). This implies 6.6x FY25F P/E.

Source: BIMB Securities Research - 6 Dec 2024