Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Company Name: SAPURACREST PETROLEUM BHD
| Research House: AMMB | Price Call: BUY | Target Price: 5.44 |
We reiterate our BUY call on SapuraCrest Petroleum(SapCrest), with an unchanged fair value of RM5.44/share, based on an unchangedCY12F PE of 22x for the group's merged earnings with Kencana Petroleum.
SapCrest has entered into a contract with Brazil-based OSXConstru''o Naval S.A. (OSX) to build a 300 tonne-pipelay support vessel (PLSV).This involves the provision of detailed design, engineering, procurement of allequipment, construction, assembly, installation, completion, testing, survey,commissioning, sea trials and successful delivery of the vessel within 36months from 15 December 2011 to 15 December 2014.
This award to a Brazilian yard is expected, given Petrobras'local content requirement in the award of the three PLSV charter contractsworth US$1.4bil (RM4.2bil) in November last year. Rio de Janeiro-based OSX,formerly known as OSX Estaleiros S.A and a subsidiary of OSX Brasil S.A,engages in shipbuilding and repairing services. OSX, which has a shipbuildingdivision in partnership with Hyundai Heavy Industries, also supplies ships andother equipment to the oil and gas industry. While SapCrest did not reveal thefixed lump sum cost of the vessel, OSX Brasil SA announced its value atUS$263mil (RM789mil).
Recall that SapCrest had earlier awarded the construction oftwo 550-tonne pipelay support vessels to Netherlands-based IHC Offshore &Marine at an undisclosed price in January this year. The two vessels are to becompleted and delivered within 30 and 33 months in May 2014 and August 2014,respectively. But given that the construction costs of Brazil yards are moreexpensive, we believe that the basic construction costs of all three vessels arebelow US$789mil. Translating into 56% of the PLSV charter contract, SapCrestappears to have a comfortable margin.
The three PLSVs will be owned, managed and operated by a50:50 joint venture with Norway-based Seadrill Ltd. Seadrill is still aiming tolist Seabras in Brazil in April this year and plans to inject its stake in thethree PLSVs together with three ultra-deepwater semisubmersibles and threedrill ships.
The group's order book remains at an estimated RM13bil,which will last until 2019, and is the largest by far in the sector. As thisoutsourced construction contract does not increase the group's order book, wemaintain FY12F-FY14F earnings. The stock currently trades at an attractiveFY13F PE of only 19x, vis-''-vis its 2007 peak of 29x.
Source: AmeSecurities
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