Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
SapuraCrest Petroleum Bhd
(Aug 9, RM4.23)
Maintain buy at RM4.41 with fair value of RM5.44: We reiterate our 'buy' call on SapuraCrest Petroleum (SapCrest) with an unchanged fair value of RM5.44 based on an unchanged CY12F price-earnings ratio (PER) of 22 times for the group's merged earnings with Kencana Petroleum Bhd.
Following SapCrest's announcement on July 6, it has entered into a conditional agreement to acquire Australia-listed Clough Ltd's marine construction business for A$127 million (RM390 million).
This involves acquiring three key construction vessels and two deepwater remote operated vessels. The acquisition is expected to be completed in 4Q11.
This development is not surprising as SapCrest's executive vice-chairman Datuk Shahril Shamsuddin has said the group plans to spend up to US$900 million (RM2.7 billion) within the next two years to build more capacity and grow in the region.
Based on Clough's announcement yesterday, the marine construction business registered earnings of A$24 million in FY10 ended June but a loss of A$8 million for the 6-month period ended Dec 31, 2010.
But based on Clough's historical FY10 results, the acquisition PER translates to an attractive five times while Clough is only expected to generate a one-off gain of A$8 million from the sale.
The asset acquisition will only add value to SapCrest if it helps to accelerate the group's order book accretion. Pending news of material fresh orders which will be serviced by the new assets, we maintain FY12 to FY14 earnings.
Based on the estimated net gearing of 0.3 times for the merged Kencana-SapCrest entity, this proposed Clough acquisition will have a slight impact on the group's borrowing levels. But if the group continues its aggressive expansion plans, we expect the merged entity's net gearing level to reach 0.6 times, but still lower than Bumi Armada Bhd's 0.8 times currently.
The stock currently trades at an attractive CY11F PER of only 17 times compared with over 20 times for Dialog Group, Malaysia Marine and Heavy Engineering Bhd and Kencana Petroleum. We remain positive about the synergistic benefits of the vertical integration of the two leading domestic oil and gas players and a potential new member of the FBM KLCI. ' AmResearch, Aug 9
This article appeared in The Edge Financial Daily, August 10, 2011.
Company Name: SAPURACREST PETROLEUM BHD
| Research House: AMMB | Price Call: BUY | Target Price: 5.44 |
SapuraCrest Petroleum Bhd
(Aug 9, RM4.23)
Maintain buy at RM4.41 with fair value of RM5.44: We reiterate our 'buy' call on SapuraCrest Petroleum (SapCrest) with an unchanged fair value of RM5.44 based on an unchanged CY12F price-earnings ratio (PER) of 22 times for the group's merged earnings with Kencana Petroleum Bhd.
Following SapCrest's announcement on July 6, it has entered into a conditional agreement to acquire Australia-listed Clough Ltd's marine construction business for A$127 million (RM390 million).
This involves acquiring three key construction vessels and two deepwater remote operated vessels. The acquisition is expected to be completed in 4Q11.
This development is not surprising as SapCrest's executive vice-chairman Datuk Shahril Shamsuddin has said the group plans to spend up to US$900 million (RM2.7 billion) within the next two years to build more capacity and grow in the region.
Based on Clough's announcement yesterday, the marine construction business registered earnings of A$24 million in FY10 ended June but a loss of A$8 million for the 6-month period ended Dec 31, 2010.
But based on Clough's historical FY10 results, the acquisition PER translates to an attractive five times while Clough is only expected to generate a one-off gain of A$8 million from the sale.
The asset acquisition will only add value to SapCrest if it helps to accelerate the group's order book accretion. Pending news of material fresh orders which will be serviced by the new assets, we maintain FY12 to FY14 earnings.
Based on the estimated net gearing of 0.3 times for the merged Kencana-SapCrest entity, this proposed Clough acquisition will have a slight impact on the group's borrowing levels. But if the group continues its aggressive expansion plans, we expect the merged entity's net gearing level to reach 0.6 times, but still lower than Bumi Armada Bhd's 0.8 times currently.
The stock currently trades at an attractive CY11F PER of only 17 times compared with over 20 times for Dialog Group, Malaysia Marine and Heavy Engineering Bhd and Kencana Petroleum. We remain positive about the synergistic benefits of the vertical integration of the two leading domestic oil and gas players and a potential new member of the FBM KLCI. ' AmResearch, Aug 9
This article appeared in The Edge Financial Daily, August 10, 2011.
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