By HwangDBS Vickers Research
Target Price: RM10.10
THE 20 sen per share special dividend Bursa Malaysia (Bursa) declared in July lifted financial year ending Dec 31, 2013 forecast (FY13F) yield to 6%.
HwangDBS Vickers Research estimates that Bursa is still sitting on RM400mil excess cash after setting aside RM265mil for FY13 dividends.
It said management indicated the excess cash was reserved for business expansion and higher allocation for clearing guarantee funds.
It said Bursa had set aside RM100mil for this capital requirement, but if securities and derivatives trade values continued to rise going forward, it might need to raise the reserve funds. That said, the research house does not discount part of the excess cash being returned to shareholders (via a special dividend).
It said Bursa’s strong free cash flow and low capital expenditure (capex) should support higher dividend payouts and that it understood Bursa was in its last leg of technology upgrade and that capex requirement would decline consequently.
The research house added that structural changes such as a revision in listing fees, revamp of tax structure (GST replaces stamp duty), and streamlining of surveillance roles (leading to cost savings) could unlock value and that Bursa could lift FY15F earnings by 20% and dividend yield to 5% from 4%.
HwangDBS Vickers added that its dividend discount model-based RM10.10 target price assumes 90% dividend payout (excluding special dividend), 7% long term growth, and 11% cost of equity and the current mean valuation represented a good opportunity to accumulate the stock.
By RHB Research
Target Price: RM4.50
BUMI Armada Bhd announced that Afren Energy Resources Ltd has extended its contracts for a bareboat charter with Armada Floating Solutions Ltd as well as the operations and maintenance services with Bumi Armada (Singapore) Pte Ltd in respect of the Armada Perkasa, a floating production, storage and offloading (FPSO) vessel for two more years.
Both companies are wholly-owned subsidiaries of Bumi Armada. The extension period will commence on July 1, 2014 and is worth around US$68mil (RM221mil) in total. The Armada Perkasa, which was deployed to offshore Nigeria in the Okoro-Setu field, has the capacity to store 360,000 barrels of oil.
The original contract was awarded in 2007 and took effect from July1, 2008. It was for a fixed period of five years, with five one-year extension options. The first option period was exercised last year and took effect from July 1.
Inclusive of option extension periods, as at October, BAB’s total orderbook stands at around RM7bil.
RHB Research maintains a “buy” call with a fair value of RM4.50 and it is keeping its FY13/14/15 earnings estimates unchanged, as it has taken into account the option for the contract’s extension into the research unit’s forecasts.
The brokerage believes that investors should accumulate the stock ahead of potential contract wins for projects that have been long delayed, namely the Madura FPSO vessel charter contract. RHB Research also anticipates more details of the Kraken oil field FPSO contract. As such, there is still more upside to our FY14/15 earnings estimates.
SAPURAKENCANA PETROLEUM BHD
By CIMB Research
Target Price: RM6.73
CIMB Research continues to value the stock at 22.5 times calendar year 2015 price-to-earnings (P/E), a 40% premium over our implied market target of 16.1 times but still within the historical P/E range of the oil and gas (O&G) big-caps.
It is maintaining its “add” call, with the Newfield purchase and strong order book momentum as major re-rating catalysts. SapuraKencana is the research house’s top pick among the O&G big-caps.
Petroleum Nasional Bhd has awarded a contract covering transport and installation (T&I) activities for three years commencing 2014 to TL Offshore, PBJV and GOM Resources, which are wholly-owned units of SapuraKencana, BARAKAH OFFSHORE PETROLEUM BHD and PUNCAK NIAGA HOLDINGS BHD, respectively. The total work value is almost RM10bil, spread over four packages - A, B, C and D.
CIMB Research, which is not surprised by the announcement, said SapuraKencana was widely expected to clinch packages C and D.
It said the company was the winner of three out of four packages (the remaining one was secured by GOM) under the first 3+1 contract, which was awarded in December 2009.
The breakdown of the total work value was not disclosed but we estimate SapuraKencana’s two packages to be worth RM5.4bil, taking its order book to around RM28bil, the sector’s largest.
CIMB Research said the T&I job was no doubt sizeable but, spread over three years and in the bigger scheme of things, it was not expected to move the needle significantly for the company given its two transformative exercises, which are the Seadrill and Newfield acquisitions. The brokerage views the T&I job as a continuation of the first one that was awarded in 2009.
CIMB recommends investors to accumulate the stock and ride SapuraKencana’s strong earnings thrust brought about by the Seadrill and Newfield acquisitions, the main drivers behind the stock’s three-year earnings per share compounded annual growth rate of 43%, which is almost double the sector average.
By PublicInvest Research
Target Price: 45 sen
DAYA Vessels Limited (DVL), a subsidiary of Daya OCI Sdn Bhd (DOCI) and SBM Installer S.A.R.L (SBM) entered into an memorandum of agreement (MOA) for the US$180mil (about RM577mil) acquisition of a newbuild diving support and construction vessel (DPDSV).
The acquisition, however, may likely lapse considering the details of the (MOA). Albeit this, with current contracts on hand coupled with potential contracts it could be close to securing, Daya will continue to look forward to entering an exciting phase.
With that, PublicInvest Research reiterates its “outperform” call with an unchanged target price of 45 sen premised on 12 times financial year ending Dec 31, 2014 (FY14) earnings per share of 3.71 sen.
It said Daya’s board of directors recognised their responsibility to make appropriate and timely announcements, however in this case did not want to mislead or confuse its shareholders.
It added that while SBM agreed to sell the DPDSV, Daya however did not have the intention to purchase the vessel, and as such did not attempt to meet the terms of the MOA, adding that it believed the group was seeking further legal advice to resolve this matter.
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