October 28, 2013

Carigali Hess Contract Boosts SapuraKencana Orderbook

SapuraKencana Petroleum Bhd (SapuraKencana) RM62 million contract win for the provision of subsea inspection services for Carigali-Hess Facilities from Carigali-Hess Operating Company Sdn Bhd via its wholly-owned unit Allied Marine and Equipment Sdn Bhd (AME) has been met with approval from analysts as the contract has ensured that the group’s orderbook remains strong.
In an announcement to Bursa Malaysia last week, SapuraKencana stated that the contract includes the inspection of Carigali Hess jackets, pipelines and floating storage and offloading vessel (FSO).
AME will also provide diving equipment, remotely operated vehicle (ROV), support vessel, personnel and inspecting/recording equipment as well as tools and spares required to perform the services and other work.
According to Aaron Tan Wei Min from the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), SapuraKencana’s orderbook remains strong at US$7.7 billion (approximately RM25 billion), with the tenderbook value being almost similar to the current orderbook.
Moving forward, he noted that SapuraKencana will be focusing more on the drilling equipment set (DES) and offshore construction and subsea services (OCSS) segments where margins are significantly higher and more value-added activities can be undertaken.
“In addition, the group is also looking at east two more Risk Service Contracts from Petroliam Nasional Bhd (Petronas).
“Channel checks indicated that the awards are likely to be announced in the first quarter of the current year 2014 (1Q14),” Tan added.
Overall, MIDF Research is bullish on SapuraKencana and thus maintained its ‘buy’ recommendation on the stock at a target price of RM4.86 per share, on the back of a forward price earnings ratio 15 (PER15) of 20-fold and earnings per share 2015 (EPS15) of 24.3sen.
“We like SapuraKencana for its integrated oil and gas business model, consistently strong orderbook replenishment (burn rate of three years) and its status as a strong beneficiary of Petronas’ strong capital expenditure (capex) spending for the next few years,” Tan explained.

Source: Borneo Post