"We feel that the company, being heavily exposed to the upstream value chains of oil and gas industry, stands to be hardly hit by the current oil down-cycle which may pose possible risk on further order-book replenishments.
"With that, we hold firm of our view that we may possibly see a full-year break-even results only beyond FY22," it said.
The research house, which has an "underperform" call on Sapura Energy said the group is currently undergoing a cost-cutting exercise with an aim to reduce opex by RM650mil in FY21.
Sapura Energy is also negotiating for a refinancing exercise to lengthen its borrowings maturity profile to 10 years from an average of three years, as well as injecting additional working capital of about RM1.5bil to weather the current downcycle.
However, Kenanga is optimistic over Sapura Energy's new contract wins considering the current challenging environment in the oil and gas sector.
Including the recent contract wins of RM840mil, the group has secured about RM1.6bil in contract years to date and stands on an order book of about RM14bil.
The three new contracts announced yesterday include two engineering and construction (E&C) jobs in Brazil and Mexico, and one drilling contract in Ivory Coast.
Kenanga expects these jobs to fetch operating margins in the teens.
The research house maintained its target price of five sen on Sapura Energy, with expectations of full-year break-even earnings to occur in FY23 or beyond.
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