KUALA LUMPUR: AmInvestment Research believes that Sapura Energy Bhd’s outstanding order book can increase by 10% to RM13bil based on the group’s bids of RM53bil currently.
In a research note yesterday, it said the RM53bil would be 4.1 times its current order book. Additionally, the group is looking for prospective projects worth up to RM93bil.
“We recall that Sapura’s first quarter of financial year 2022(Q1FY22) normalised loss of RM49mil (excluding RM48mil one-off items for unamortised borrowing costs and de-designation of hedging instruments) could have turned around to a net profit of RM35mil,” it said.
This was after the removal of forex losses of RM43mil and Covid-19-related costs of RM42mil from quarantine, tests and productivity losses, the research house said.
AmInvestment Research also said all four core operations of the group were profitable in Q1FY22 with the drilling division rebounding to a pre-tax profit of RM22mil with only seven rigs in operation.
Against the backdrop of improving prospects for new jobs across the globe, better cost structure and underpinned by a revitalised RM10bil debt structure amid more optimistic crude oil prices, its stock currently trades at an undeserved fire-sale 0.2 times price-to-book value for an integrated oil and gas operator with an established regional footprint and proven delivery record.
The research house reiterated its “buy” recommendation on Sapura Energy with an unchanged fair value of 29 sen a share, pegged to a 50% discount to its forecast FY21 book value.
This valuation reflects a neutral Environmental, Social, and Governance (ESG) rating of three stars.
“Our forecasts, which are higher than consensus, are maintained as Sapura’s new contracts worth RM1.2bil to provide engineering & construction (E&C), operations & maintenance (O&M) and drilling services are in line with its forecast FY22 fresh order book assumption of RM6bil,” it said.