PETALING JAYA: T7 Global Bhd
is seen as a prime beneficiary of the rising global capital-expenditure upcycle, with strong earnings growth prospects and a consistent recurring income stream.
According to Phillip Research, T7 enjoys a significant competitive advantage as one of the few companies offering integrated plug and abandonment (P&A) services for oil and gas wells to clients in Malaysia.
“The P&A activities are expected to remain high in 2024, and we understand that T7 is bidding for several projects with P&A, hook-up and commissioning (HUC), and maintenance, construction, modification (MCM) work comprising 50% of its current tender book,” the research house said.
It highlighted that T7 has undertaken P&A projects in various fields for PETRONAS Carigali, including the M3 field in Sarawak, the Pulai-A field in Peninsular Malaysia, and projects under the Pan Malaysia umbrella contract covering Peninsular Malaysia, Sabah, and Sarawak.
In addition, the company has also worked on the PM3 and Kinabalu fields for Hibiscus Petroleum Bhd.
Phillip Research said T7’s profit base from 2024 onwards will provide better earnings visibility backed by both its incoming mobile offshore production units (Mopus).
“We estimate that Nong Yao Mopu will contribute about RM80mil in annual revenue, with the total contract value to be RM400mil,” it added.
The research outfit said the Bayan Mopu will be a bigger revenue contributor, with an estimated RM90mil in annual revenue.
“We expect both Mopus to contribute RM17mil in profit after tax, constituting 33% of our 2024 net profit forecasts,” it added.
Phillip Research reiterated that T7 is poised to benefit from the anticipated global industry capital-expenditure recovery amid rising crude oil prices.
As it is, PETRONAS’ increased RM60bil annual capital expenditure allocation is anticipated to further bolster the recovery of domestic activity.
Meanwhile, T7’s Mopus offer strong earnings visibility and a stable recurring revenue stream.
The first Mopu started operation at PETRONAS Carigali’s Bayan field in July 23 for a 10-year period. T7 has also made forays into the regional market by securing its second Mopu for Busrakham G11 (a subsidiary of Mubadala Energy) for the Nong Yao field, scheduled to commence charter in 2Q24 for a five-year period.
“We estimate both Mopus to contribute about 33% of our 2024 net profit forecasts.
“The group is also actively pursuing two more Mopu projects, with a combined value of circa RM800mil-RM900mil. T7’s positive outlook is backed by a sizeable RM3.8bil tender book,” it said.
The group will also be participating in the upcoming PETRONAS’ Pan Malaysia HUC/MCM tenders, expected to be awarded by end-2024.
Phillip Research has initiated a “buy” rating on the counter, projecting a three-year 18% net profit compounded annual growth rate, fuelled by the two new incoming Mopus, KLIA Terminal 1 baggage handling system contract, and increasing oil and gas activity.
