JF Apex raises Sapura Energy to Buy with TP of 50 sen

KUALA LUMPUR: JF Apex Securities research views Sapura Energy Bhd's deal to divest a 50% stake in Sapura Upstream to OMV AG for US$890mil as positive.

The research house lifted its recommendation to buy from hold with a higher target price of 50 sen from 42 sen previously.

It said the deal unlocks the value of Sapura Upstream, lifts Sapura Energy's debt burden and creates synergy in exploration and development activities as OMV has upstream assets around the world with proven reserves of 11.5 bboe and daily production of 348,000 barrels/day.

To recap, the US$890mil cash proceeds will be divided into US$720mil to repay Sapura Energy's debt and US$160mil for working capital. 

"OMV also agreed for an additional consideration worth US$55m plus up to another US$30m in contingency funds mainly linked to the resource volume in Block 30, Mexico.

"In total, Sapura Energy would receive minimum cash proceeds of between US$920m and US$975m and book a gain of disposal of US$649 million."

JF Apex is raising its net profit forecast for FY20 by over 10-fold to RM2.46bil due to interest savings from repayment from debt and gain from disposal of RM2.7bil, while it is keeping its FY19 estimate unchanged.