Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: INTER PACIFIC
SapuraCrest Petroleum Bhd
(June 28, RM2.27)
Recommend outperform at RM2.25 with target price of RM2.90: We like SapuraCrest, given its unleashed prospects. Earnings catalyst will come from (1) active orderbook replenishment; 2) success in new markets; and 3) a growing fleet of strategic assets. Our target price is at RM2.90 with FY2011 earnings per share of 16.9 times and FY2011 price-earnings ratio of 17.1 times.
In 1QFY2011, despite a decline in revenue, net profit swelled by 97.5% year-on-year (y-o-y) ' thanks to better margins from the installations of pipelines and facilities (IPF), which went up 8.8 percentage points to 12.9% y-o-y, while drilling was up 9.7 percentage points to 39.2% y-o-y. The PCSB Umbrella project win and commendable joint-venture contribution bumped up IPF margins, while improved drilling margins were caused by higher drilling charter rates garnered in FY2010 for T9 and Teknik Berkat.
With the orderbook standing at RM9.1 billion, SapuraCrest's earnings visibility appears to be good, at least for the next two years. However, we learnt that there are risks should installation contracts be delayed, especially if the direction of crude oil prices remains uncertain.
Any review of the safety standards of offshore facilities could also potentially escalate cost estimates and affect the viability of new projects. ' Inter-Pacific Research Sdn Bhd
This article appeared in The Edge Financial Daily, June 29, 2010.
Company Name: SAPURACREST PETROLEUM BHD
Research House: INTER PACIFIC
SapuraCrest Petroleum Bhd
(June 28, RM2.27)
Recommend outperform at RM2.25 with target price of RM2.90: We like SapuraCrest, given its unleashed prospects. Earnings catalyst will come from (1) active orderbook replenishment; 2) success in new markets; and 3) a growing fleet of strategic assets. Our target price is at RM2.90 with FY2011 earnings per share of 16.9 times and FY2011 price-earnings ratio of 17.1 times.
In 1QFY2011, despite a decline in revenue, net profit swelled by 97.5% year-on-year (y-o-y) ' thanks to better margins from the installations of pipelines and facilities (IPF), which went up 8.8 percentage points to 12.9% y-o-y, while drilling was up 9.7 percentage points to 39.2% y-o-y. The PCSB Umbrella project win and commendable joint-venture contribution bumped up IPF margins, while improved drilling margins were caused by higher drilling charter rates garnered in FY2010 for T9 and Teknik Berkat.
With the orderbook standing at RM9.1 billion, SapuraCrest's earnings visibility appears to be good, at least for the next two years. However, we learnt that there are risks should installation contracts be delayed, especially if the direction of crude oil prices remains uncertain.
Any review of the safety standards of offshore facilities could also potentially escalate cost estimates and affect the viability of new projects. ' Inter-Pacific Research Sdn Bhd
This article appeared in The Edge Financial Daily, June 29, 2010.
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