Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
SapuraCrest Petroleum Bhd
(Aug 3, RM4.47)
Maintain buy at RM4.47 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.
The Edge Financial Daily reported that SapCrest's 50%-owned SapuraAcergy, which owns the derrick-pipelay vessel Sapura3000, could secure up to US$260 million (RM774.8 million) contracts for the Gorgon natural gas project, off Western Australia.
Subsea7, which was formed from the merger of Acergy SA and Subsea 7 Inc, has recently secured a US$440 million construction contract from Chevron, the operator of the Gorgon project. Subsea 7 said it will use Sapura3000 for this project commencing in 2013. Sapura3000 is expected to secure almost 60% of Subsea7's Gorgon contract value.
The construction contract includes installation and tie-in of heavy lift structures in the Gorgon and Jansz fields, which are located 65km and 130km from Barrow Island, off the northwest coast of Western Australia. The project will reach undersea depths of 1,350m.
This contract could raise SapCrest's current gross order book of RM8.6 billion by 9% to RM9.3 billion or a net order book of RM7.2 billion ' 1.7 times FY12F revenue. But we maintain FY14F earnings as our assumptions already incorporate fresh orders of RM2 billion annually.
Recall that Kencana Petroleum and SapCrest have announced a merger proposal that will create a regional integrated service provider for the upstream oil and gas (O&G) sector. The proposal involves an offer by Integral Key Sdn Bhd ' a special purpose vehicle wholly owned by Mayban Ventures Sdn Bhd ' to acquire SapCrest's entire business at RM4.60 per share comprising 85% in new Integral shares (RM3.91 per share) and 15% cash (69 sen per share).
While the capital distribution to the shareholders of SapCrest and Kencana could result in a merged net gearing of up to 0.3 times (higher than our earlier estimated 0.2 times as only one of the merged companies may be accounted as an acquisition), we remain positive on the synergistic benefits of this vertical integration of the two leading domestic O&G players and a potential new member of the FBM KLCI.
The stock currently trades at an attractive CY11F PER of only 17 times against over 20 times for Dialog Group Bhd, Malaysia Marine and Heavy Engineering Sdn Bhd and Kencana Petroleum. ' AmResearch, Aug 3
This article appeared in The Edge Financial Daily, August 4, 2011.
Company Name: SAPURACREST PETROLEUM BHD
| Research House: AMMB | Price Call: BUY | Target Price: 5.44 |
SapuraCrest Petroleum Bhd
(Aug 3, RM4.47)
Maintain buy at RM4.47 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.
The Edge Financial Daily reported that SapCrest's 50%-owned SapuraAcergy, which owns the derrick-pipelay vessel Sapura3000, could secure up to US$260 million (RM774.8 million) contracts for the Gorgon natural gas project, off Western Australia.
Subsea7, which was formed from the merger of Acergy SA and Subsea 7 Inc, has recently secured a US$440 million construction contract from Chevron, the operator of the Gorgon project. Subsea 7 said it will use Sapura3000 for this project commencing in 2013. Sapura3000 is expected to secure almost 60% of Subsea7's Gorgon contract value.
The construction contract includes installation and tie-in of heavy lift structures in the Gorgon and Jansz fields, which are located 65km and 130km from Barrow Island, off the northwest coast of Western Australia. The project will reach undersea depths of 1,350m.
This contract could raise SapCrest's current gross order book of RM8.6 billion by 9% to RM9.3 billion or a net order book of RM7.2 billion ' 1.7 times FY12F revenue. But we maintain FY14F earnings as our assumptions already incorporate fresh orders of RM2 billion annually.
Recall that Kencana Petroleum and SapCrest have announced a merger proposal that will create a regional integrated service provider for the upstream oil and gas (O&G) sector. The proposal involves an offer by Integral Key Sdn Bhd ' a special purpose vehicle wholly owned by Mayban Ventures Sdn Bhd ' to acquire SapCrest's entire business at RM4.60 per share comprising 85% in new Integral shares (RM3.91 per share) and 15% cash (69 sen per share).
While the capital distribution to the shareholders of SapCrest and Kencana could result in a merged net gearing of up to 0.3 times (higher than our earlier estimated 0.2 times as only one of the merged companies may be accounted as an acquisition), we remain positive on the synergistic benefits of this vertical integration of the two leading domestic O&G players and a potential new member of the FBM KLCI.
The stock currently trades at an attractive CY11F PER of only 17 times against over 20 times for Dialog Group Bhd, Malaysia Marine and Heavy Engineering Sdn Bhd and Kencana Petroleum. ' AmResearch, Aug 3
This article appeared in The Edge Financial Daily, August 4, 2011.
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