Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: OTHER
SapuraCrest Petroleum Bhd
(June 13, RM4.14)
Initiate coverage at RM4.21 with price objective of RM5.07: We initiate coverage on SapuraCrest, a leading offshore service provider for field development works in Malaysia, with a buy rating. Our RM5.07 price objective is based on a 19 times blended FY12/13E PE (FYE Jan) and cross-checked with a 0.8 times PEG. We expect new offshore projects and analysts' earnings upgrades to drive the stock.
SapuraCrest's installation of pipelines and facilities (IPF) division is the leading provider of offshore transportation and installation (T&I) services in Malaysia, with more than 70% market share. We believe it will be the prime beneficiary of Petroliam Nasional Bhd's expected increase of exploration and production (E&P) spending to RM55 billion per annum from April 2011 to March 2016, versus RM40 billion in its fiscal year to March 2011.
Our net profit forecasts for SapuraCrest are 5% above consensus for FY12 (FYE Jan), 12% for FY13, and 23% for FY14. This implies a 23% net profit CAGR in FY12-FY14E. We believe our more optimistic earnings forecasts are due to lower minority interest projections and higher operating profit margin expectations.
We expect SapuraCrest's timely use of its strong balance sheet to finance its US$900 million (RM2.74 billion) two-year capex plan should further boost earnings growth. Excluding US$200 million capex in the Berantai Phase 1 marginal oilfield project, the scenario analysis a 15% to 25% earnings boost to our forecast for FY14, from spending the remaining US$700 million capex on various types of offshore projects and assets. Our analysis shows that SapuraCrest can finance this capex plan using debt and operating cash flow, with low risk of a cash call in the next 12 months.
Key risks: 1) cost overruns for offshore T&I work, 2) poor use of US$900 million capex which diminishes prospects, and 3) unexpected retirement of older tender rigs. ' Bank of America-Merrill Lynch Research, June 13
This article appeared in The Edge Financial Daily, June 14, 2011.
Company Name: SAPURACREST PETROLEUM BHD
Research House: OTHER
SapuraCrest Petroleum Bhd
(June 13, RM4.14)
Initiate coverage at RM4.21 with price objective of RM5.07: We initiate coverage on SapuraCrest, a leading offshore service provider for field development works in Malaysia, with a buy rating. Our RM5.07 price objective is based on a 19 times blended FY12/13E PE (FYE Jan) and cross-checked with a 0.8 times PEG. We expect new offshore projects and analysts' earnings upgrades to drive the stock.
SapuraCrest's installation of pipelines and facilities (IPF) division is the leading provider of offshore transportation and installation (T&I) services in Malaysia, with more than 70% market share. We believe it will be the prime beneficiary of Petroliam Nasional Bhd's expected increase of exploration and production (E&P) spending to RM55 billion per annum from April 2011 to March 2016, versus RM40 billion in its fiscal year to March 2011.
Our net profit forecasts for SapuraCrest are 5% above consensus for FY12 (FYE Jan), 12% for FY13, and 23% for FY14. This implies a 23% net profit CAGR in FY12-FY14E. We believe our more optimistic earnings forecasts are due to lower minority interest projections and higher operating profit margin expectations.
We expect SapuraCrest's timely use of its strong balance sheet to finance its US$900 million (RM2.74 billion) two-year capex plan should further boost earnings growth. Excluding US$200 million capex in the Berantai Phase 1 marginal oilfield project, the scenario analysis a 15% to 25% earnings boost to our forecast for FY14, from spending the remaining US$700 million capex on various types of offshore projects and assets. Our analysis shows that SapuraCrest can finance this capex plan using debt and operating cash flow, with low risk of a cash call in the next 12 months.
Key risks: 1) cost overruns for offshore T&I work, 2) poor use of US$900 million capex which diminishes prospects, and 3) unexpected retirement of older tender rigs. ' Bank of America-Merrill Lynch Research, June 13
This article appeared in The Edge Financial Daily, June 14, 2011.
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