Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: AMMB
SapuraCrest Petroleum Bhd
(April 21, RM3.70)
Maintain buy at RM3.67 with fair value of RM4.75: We reiterate our 'buy' call on SapuraCrest Petroleum Bhd (SapCrest) with an unchanged fair value of RM4.75 based on an unchanged FY12F price-earnings ratio (PER) of 22 times.
We recently met with Sapura group's executive director for group treasury and corporate finance, Chow Mei Mei, and SapCrest's new chief financial officer, Aliza Ashari.
The key highlights of our meeting with management are: (i) No firm time line for an equity raising exercise at this stage, likely awaiting the announcement of the results of SapCrest's tenders which will provide greater clarity for its proposed US$900 million (RM2.7 billion) capital expenditure requirements.
(ii) Besides additional marginal oilfield projects, the group may be looking at acquiring at least two additional derrick lay barges (DLB) for SapCrest's installation of pipeline and facilities (IPF) division for domestic and overseas jobs. Each DLB could cost US$200 million (RM600 million) to US$250 million, depending on the vessel specifications.
(iii) As the group's acquisitions and capital raising exercise are still at the planning stage, we maintain FY12F/14F earnings. Our FY12F earnings of RM281 million is 4% below consensus earnings of RM293million, which we understand may be aggressive given that the group's IPF segment may be weaker this year.
(iv) As guided earlier, the pipe-laying and installation segment, which accounted for 36% of SapCrest's FY11 earnings before interest and tax (Ebit), is likely to register slightly lower contributions in FY12F due to higher one-off jobs in FY11;
(v) Its marine division, which registered a surprise Ebit of RM13 million in 4QFY11 (against a RM39 million loss in 3QFY11 and RM44 million loss in 4QFY11), is expected to remain in the black this year. The turnaround stemmed from improved charter rates and utilisation of its seven marine support vessels,'' and additional work for this segment's 14 ROVs and two SDS.
(vi) The drilling division, which contributed 47% of the group's FY11 Ebit, will be flat in FY12F as the five tender rig charter contracts will need to be renewed only after January 2012.
(vii) SapCrest's outstanding orders are currently worth RM8.6 billion, which will last another three years.
But the group's Pan-Malaysian transport and installation project has the option for two annual renewals.
Hence, the group could add another RM3 billion to RM12 billion to its net order book, which remains by far the largest order book in Malaysia's oil and gas industry.
The stock currently trades at an attractive CY11F PER of only 17 times vis-''-vis over 20 times for Dialog Group Bhd, Malaysia Marine and Heavy Engineering Sdn Bhd and Kencana Petroleum Bhd. ' AmResearch, April 21
This article appeared in The Edge Financial Daily, April 22, 2011.
Company Name: SAPURACREST PETROLEUM BHD
Research House: AMMB
SapuraCrest Petroleum Bhd
(April 21, RM3.70)
Maintain buy at RM3.67 with fair value of RM4.75: We reiterate our 'buy' call on SapuraCrest Petroleum Bhd (SapCrest) with an unchanged fair value of RM4.75 based on an unchanged FY12F price-earnings ratio (PER) of 22 times.
We recently met with Sapura group's executive director for group treasury and corporate finance, Chow Mei Mei, and SapCrest's new chief financial officer, Aliza Ashari.
The key highlights of our meeting with management are: (i) No firm time line for an equity raising exercise at this stage, likely awaiting the announcement of the results of SapCrest's tenders which will provide greater clarity for its proposed US$900 million (RM2.7 billion) capital expenditure requirements.
(ii) Besides additional marginal oilfield projects, the group may be looking at acquiring at least two additional derrick lay barges (DLB) for SapCrest's installation of pipeline and facilities (IPF) division for domestic and overseas jobs. Each DLB could cost US$200 million (RM600 million) to US$250 million, depending on the vessel specifications.
(iii) As the group's acquisitions and capital raising exercise are still at the planning stage, we maintain FY12F/14F earnings. Our FY12F earnings of RM281 million is 4% below consensus earnings of RM293million, which we understand may be aggressive given that the group's IPF segment may be weaker this year.
(iv) As guided earlier, the pipe-laying and installation segment, which accounted for 36% of SapCrest's FY11 earnings before interest and tax (Ebit), is likely to register slightly lower contributions in FY12F due to higher one-off jobs in FY11;
(v) Its marine division, which registered a surprise Ebit of RM13 million in 4QFY11 (against a RM39 million loss in 3QFY11 and RM44 million loss in 4QFY11), is expected to remain in the black this year. The turnaround stemmed from improved charter rates and utilisation of its seven marine support vessels,'' and additional work for this segment's 14 ROVs and two SDS.
(vi) The drilling division, which contributed 47% of the group's FY11 Ebit, will be flat in FY12F as the five tender rig charter contracts will need to be renewed only after January 2012.
(vii) SapCrest's outstanding orders are currently worth RM8.6 billion, which will last another three years.
But the group's Pan-Malaysian transport and installation project has the option for two annual renewals.
Hence, the group could add another RM3 billion to RM12 billion to its net order book, which remains by far the largest order book in Malaysia's oil and gas industry.
The stock currently trades at an attractive CY11F PER of only 17 times vis-''-vis over 20 times for Dialog Group Bhd, Malaysia Marine and Heavy Engineering Sdn Bhd and Kencana Petroleum Bhd. ' AmResearch, April 21
This article appeared in The Edge Financial Daily, April 22, 2011.
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