Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
SapuraCrest Petroleum Bhd
(Oct 4, RM3.52)
Maintain buy at RM3.51 with fair value of RM5.44: We reiterate our 'buy' call on SapuraCrest Petroleum Bhd (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 Tanjung Offshore Bhd's announcement that it had awarded shipbuilding contracts worth RM200 million to Muhibbah Marine Engineering and SapCrest's 50%-owned Labuan Shipyard & Engineering Sdn Bhd for the construction and commissioning of two platform supply vessels (PSV), SapCrest confirmed it has secured one of those contracts. SapCrest's RM100 million contract involves engineering and constructing a 77m PSV for Tanjung Offshore within 21 months.
The PSV will be used to supply and support the deepwater operations of oil majors in operational waters in Southeast Asia on a long-term basis. The PSV will also be utilised for operations in unrestricted waters and is designed to perform: (i) transport of drilling mud, cement, brine, base oil, diesel fuel and chemicals; (ii) transport of common and speciality tools; and (iii) fire fighting capabilities.
Recall that SapCrest signed an agreement in June this year to acquire a 50% stake in Labuan Shipyard and Engineering Sdn Bhd (LSE) from Real Mild Sdn Bhd for RM25 million cash. Currently, this yard is supporting the repair and maintenance of SapCrest's rigs, construction of vessels/barges and offshore support vessels.
We expect minimal contribution from this contract given the change in the yard's management, coupled with weak delivery and financial track record. Assuming a pre-tax margin of 5%, we estimate that this contract will contribute less than 1% to SapCrest's FY13F earnings. Hence, we maintain FY12F to FY14F net profit.
We remain positive about SapCrest's prospects as the group clearly expects significant order book accretions with its recently announced award of a fabrication contract to Cosco Corp subsidiary Cosco Nantong Shipyard Co Ltd to build two pipelay-cum-heavylift offshore construction vessels for a combined value of US$227 million (RM726 million).
The stock currently trades at an attractive CY12F PER of only 14 times against its 2007 peak of 29 times. ' AmResearch, Oct 4
This article appeared in The Edge Financial Daily, October 5, 2011.
Company Name: SAPURACREST PETROLEUM BHD
| Research House: AMMB | Price Call: BUY | Target Price: 5.44 |
SapuraCrest Petroleum Bhd
(Oct 4, RM3.52)
Maintain buy at RM3.51 with fair value of RM5.44: We reiterate our 'buy' call on SapuraCrest Petroleum Bhd (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 Tanjung Offshore Bhd's announcement that it had awarded shipbuilding contracts worth RM200 million to Muhibbah Marine Engineering and SapCrest's 50%-owned Labuan Shipyard & Engineering Sdn Bhd for the construction and commissioning of two platform supply vessels (PSV), SapCrest confirmed it has secured one of those contracts. SapCrest's RM100 million contract involves engineering and constructing a 77m PSV for Tanjung Offshore within 21 months.
The PSV will be used to supply and support the deepwater operations of oil majors in operational waters in Southeast Asia on a long-term basis. The PSV will also be utilised for operations in unrestricted waters and is designed to perform: (i) transport of drilling mud, cement, brine, base oil, diesel fuel and chemicals; (ii) transport of common and speciality tools; and (iii) fire fighting capabilities.
Recall that SapCrest signed an agreement in June this year to acquire a 50% stake in Labuan Shipyard and Engineering Sdn Bhd (LSE) from Real Mild Sdn Bhd for RM25 million cash. Currently, this yard is supporting the repair and maintenance of SapCrest's rigs, construction of vessels/barges and offshore support vessels.
We expect minimal contribution from this contract given the change in the yard's management, coupled with weak delivery and financial track record. Assuming a pre-tax margin of 5%, we estimate that this contract will contribute less than 1% to SapCrest's FY13F earnings. Hence, we maintain FY12F to FY14F net profit.
We remain positive about SapCrest's prospects as the group clearly expects significant order book accretions with its recently announced award of a fabrication contract to Cosco Corp subsidiary Cosco Nantong Shipyard Co Ltd to build two pipelay-cum-heavylift offshore construction vessels for a combined value of US$227 million (RM726 million).
The stock currently trades at an attractive CY12F PER of only 14 times against its 2007 peak of 29 times. ' AmResearch, Oct 4
This article appeared in The Edge Financial Daily, October 5, 2011.
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