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Friday, 16 January 2015 | MYT 8:16 AM

CIMB Research upbeat on SapuraKencana ahead of return to Shariah list

KUALA LUMPUR: CIMB Equities Research is upbeat on SapuraKencana Petroleum and advised investors to accumulate shares of the oil and gas services company, underpinned by its robust order backlog of RM26.2bil.

It said on Friday other positive factors were SapuraKencana’s good leverage in the international market which gives the company an edge over its peers.

“The stock’s expected return to the Securities Commission’s Shariah list in May is an added attraction,” it said.

On Thursday, SapuraKencana successfully converted US$2.3bil of conventional loans into Malaysia’s largest Islamic facility with no change in terms and rates and at a minimum paperwork charge.

With this development, the company is set to make the SC’s shariah compliance list in the May 2015 review after being excluded in the Nov 2014 review.      .

“We continue to value the stock at 15 times CY16 price-to-earnings (P/E), at parity with our target market P/E,” it said.

What Happened SapuraKencana has finalised the conversion of US$2.3bn (RM8.2bn) of conventional loans into Malaysia’s largest Islamic facility with no change in terms and rates and at a minimum paperwork charge. With this development, the company is set to make the SC’s shariah compliance list in the May 2015 review after being excluded in the Nov 2014 review.     

As at Oct 31, 2014, SapuraKencana’s total borrowings amounted to RM15.8bil, all conventional, while total assets were worth RM32.2bil.

The company’s total conventional borrowings over total assets, therefore, stood at 49%, high and above the 33% threshold set by the SC.

After the conversion, SapuraKencana’s total conventional borrowings over total assets should be reduced to an estimated 24%, allowing the company to become Shariah-compliant come May.  

Another industry player, Perisai, successfully converted US$170mil (RM606mil) out of RM1.1bil in borrowings (as at Sept 30, 2014), of which most were conventional, into Islamic instruments in the week of Dec 29, 2014.

“Perisai’s total conventional borrowings over total assets should be reduced from 47% to an estimated 21% currently. This will allow Perisai to keep its shariah-compliant status in the May review,” it said.  

Tags / Keywords: Analyst Reports , Corporate News , Oil & Gas

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