Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: OSK
SapuraCrest Petroleum Bhd
(April 26, RM3.72)
Maintain outperform at RM3.75 with fair value raised to RM4.61 (from RM4.37): SapuraCrest's transport and installation (T&I) portion of the contracting work for Berantai is expected to be worth US$100 million to US$150 million (RM299 million to RM448.5 million) and be performed closer to year-end (nearer to the first-gas stage).
Currently, the company is in the process of finalising the accounting treatment for the Berantai operation.
Note that our FY12/13 earnings forecasts have already incorporated contributions from Berantai of RM5.6 million and RM66.8 million respectively.
Other than the US$200 million capital expenditure for the equity in Berantai field, we believe the remaining US$700 million will be utilised for regional and asset expansion.
The capex is likely to be funded via borrowings given the company's strong balance sheet.
Assets of choice will be pipe-lay barges and we understand the company is not adverse to acquiring companies that have complementary assets in order to grow.
We raise our FY11/12 earnings forecasts by 5.3% and 3.9% respectively to RM294.1 million and RM367.5 million from RM279.2 million and RM353.6 million respectively, mainly due to higher joint-venture earnings and lower minority interest deductions.
We have also introduced our FY14 net earnings estimate of RM383.1 million, which has incorporated new wins of RM2 billion for the company's installation of pipeline and facilities (IPF) business under subsidiary TL Offshore Sdn Bhd and RM3 billion for its JV companies.
The risks to our view are: (i) higher than expected costs of materials, labour and assets; (ii) more aggressive price competition for new contracts, especially in overseas markets, could cause margin pressure for IPF; (iii) delays in contracts if global economic conditions turn negative; and (iv) continued losses at the marine division against our assumption of a turnaround in FY12.
We raise our forecasts and our fair value to RM4.61 (from RM4.37 previously) using an unchanged target price-earnings ratio of 20 times.
We believe the company is on the cusp of a new cycle, as its new pipe-lay fleet will create greater opportunities and its involvement in marginal fields will provide a new source of recurring income.
We believe SapuraCrest has all the right elements moving forward: (i) a sizeable order book that will sustain earnings at least for the next 1'' years; and (ii) the right partners (Seadrill, Acergy and Larsen&Toubro) to spearhead international aspirations.
As our fair value suggests a 22.9% upside to the current share price, we maintain our 'outperform' call on the stock. ' RHB Research, April 26
This article appeared in The Edge Financial Daily, April 27, 2011.
Company Name: SAPURACREST PETROLEUM BHD
Research House: OSK
SapuraCrest Petroleum Bhd
(April 26, RM3.72)
Maintain outperform at RM3.75 with fair value raised to RM4.61 (from RM4.37): SapuraCrest's transport and installation (T&I) portion of the contracting work for Berantai is expected to be worth US$100 million to US$150 million (RM299 million to RM448.5 million) and be performed closer to year-end (nearer to the first-gas stage).
Currently, the company is in the process of finalising the accounting treatment for the Berantai operation.
Note that our FY12/13 earnings forecasts have already incorporated contributions from Berantai of RM5.6 million and RM66.8 million respectively.
Other than the US$200 million capital expenditure for the equity in Berantai field, we believe the remaining US$700 million will be utilised for regional and asset expansion.
The capex is likely to be funded via borrowings given the company's strong balance sheet.
Assets of choice will be pipe-lay barges and we understand the company is not adverse to acquiring companies that have complementary assets in order to grow.
We raise our FY11/12 earnings forecasts by 5.3% and 3.9% respectively to RM294.1 million and RM367.5 million from RM279.2 million and RM353.6 million respectively, mainly due to higher joint-venture earnings and lower minority interest deductions.
We have also introduced our FY14 net earnings estimate of RM383.1 million, which has incorporated new wins of RM2 billion for the company's installation of pipeline and facilities (IPF) business under subsidiary TL Offshore Sdn Bhd and RM3 billion for its JV companies.
The risks to our view are: (i) higher than expected costs of materials, labour and assets; (ii) more aggressive price competition for new contracts, especially in overseas markets, could cause margin pressure for IPF; (iii) delays in contracts if global economic conditions turn negative; and (iv) continued losses at the marine division against our assumption of a turnaround in FY12.
We raise our forecasts and our fair value to RM4.61 (from RM4.37 previously) using an unchanged target price-earnings ratio of 20 times.
We believe the company is on the cusp of a new cycle, as its new pipe-lay fleet will create greater opportunities and its involvement in marginal fields will provide a new source of recurring income.
We believe SapuraCrest has all the right elements moving forward: (i) a sizeable order book that will sustain earnings at least for the next 1'' years; and (ii) the right partners (Seadrill, Acergy and Larsen&Toubro) to spearhead international aspirations.
As our fair value suggests a 22.9% upside to the current share price, we maintain our 'outperform' call on the stock. ' RHB Research, April 26
This article appeared in The Edge Financial Daily, April 27, 2011.
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