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Wednesday, 10 July 2013
KUALA LUMPUR: News that SapuraKencana had won a RM576mil contract for engineering, procurement, construction, installation and commissioning (EPCIC) job from Trans Thai-Malaysia (Malaysia) Sdn Bhd has seen it continue to be a firm favourite with analysts.
AmResearch is maintaining its Buy call with a fair valuation of RM4.65, 60 sen over the current trading price of around RM4.02; Hong Leong Investment is more optimistic, setting target price at RM4.74 – unchanged from its previous call, while MIDF Research has it at RM4.86.
AmResearch noted that the group since the beginning of the year has secured RM9.8bil in new orders, with the largest being the US$2.7bil (RM8.6bil) charter for three new flexible pipe-laying support vessels from Petrobras. Last month alone, the group’s new order intake was RM9.3bil.
“This new job raises the group’s order book by 3% to estimated RM26.5bil or 3.5x financial year 2014 forecast (FY14F) revenue. The group’s order book remains the largest in the Oil and Gas sector and is double its nearest peer Bumi Armada, which has outstanding charters/contracts valued at RM12bil.
“We maintain SapuraKencana’s FY14F-FY6F earnings on expectation that the group will continue to secure fresh new jobs over the next few months, including the over RM1bil Semarang central processing platform (CPPs) – one of 10 which are expected to be tendered out over the next one to two years,” it said.
Meanwhile Hong Leong Investment said the contract reaffirmed its view that SapuraKencana is a proxy to global growth in offshore O&G production.
“The contract won increased the fabrication orderbook by 38% to RM2bil but only increased the total group orderbook by 2% to RM26.6bil. The contract period is three years, and this translates to RM192m revenue per annum.
“The contract makes up 4.6%, 5.6% and 5.8% of our replenishment assumptions for FY14, FY15 and FY16 respectively, largely in line. In addition, we believe SapuraKencana and its partner has a good chance of securing the US$1.5bn Sepat front-end engineering and design (FEED) contract from Petronas.
It said the market was undervaluing the potential of the drilling segment in Malaysia which is underpinned by massive drilling activities (22 rigs operating in 2012, and expected to rise to 38 by end 2013).
“As the world’s largest tender rig operator, SapuraKencana is one of the top picks in the drilling sector. We also like Perisai (Buy) for the related play in drilling segment,” it said.
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