SapuraKencana (BUY çè)
Integration of Newfield Asset
§ Broadly Inline: Excluding one-off gain of RM178m arising from the acquisition of Newfield business, 1QFY15 core profit surged 134% yoy due to inclusion of tender rig and Newfield assets.
§ Declared interim dividend of 1.35 sen/share and special dividend of 1 sen/share.
§ In the meantime, SK Petro has just secured 2 EPCIC contracts worth US$415m or RM1.3bn in North Malay Basin and JDA.
§ We understand there are only circa 1% of outstanding shares held by syariah funds which should ease investor concern on the potential sell off in the event of removal from Syariah compliant list.
§ Maintain BUY call with an unchanged TP of RM5.52 based on unchanged 20x FY01/16 EPS of 27.6 sen/share.
Period 1Q15/3M15
Actual vs.
Expectations
SapuraKencana Petroleum (SKPETRO) reported 1Q15
core net profit of RM334.3m which was within our
expectations, accounted for 24.3% of our full-year
FY15 estimates and 22.9% of market consensus.
Our core net profit excludes the RM2.7m foreign
exchange loss and RM177.8m gain arising from
acquisition of Newfield.
Dividends A tax exempt single tier interim dividend of 1.35 sen
and special dividend of 1.0 sen was declared, which
came as a surprise to us as we have not factored any
dividend payout in FY15.
Key Results
Highlights
In 1Q15, core net profit soared 67.6% QoQ while
revenue rose 29.7% QoQ after the inclusion of SKEI
business financial results post completion of its
acquisition on 11 February 2014.
The 1Q15 core net profit surged 133.7% on a YoY
basis, primarily due to the inclusion of Seadrill’s tender
rig business and SKEI business post their acquisitions
in Drilling and Energy Services (DES) segment. PBT in
Offshore Construction and Subsea Services (OCSS)
segment leapt 46.6% YoY, despite the revenue
contracting 13.9% over the period, mainly due to higher
contributions from its JV on completion of Gumusut
project. PBT contribution from DES (+>100.0% YoY)
and OCSS (+46.6% YoY) which helped to mitigate the
decline in Fabrication, Hook-up and Commissioning
(FAB & HUC) segment (-13.2% YoY).
Outlook At our last count, SKPETRO’s orderbook stood at
RM30b after the EPCIC wins. Tender book was guided
to be within RM30b.
We believe SKPETRO is scheduled to: (i) begin the
new campaign for Pan-Malaysia Transport and
Installation (T&I) contract, (ii) receive two DLBs and
KM-2, (iii) kick-start two Brazilian pipelay-support
vessels (PLSV), and (iv) account for Newfield’s
earnings in CY14. All these will provide near-term
catalysts for the stock.
For Newfield projects; targets are to transform the
SK310 discoveries to 2P reserves by end-CY14. For
now, the resources are estimated to be at 1.5-3.0 tcf.
Change to
Forecasts
We maintain our forecasts for now given that the 1Q15
result is within expectations.
Rating Maintain OUTPERFORM
Valuation Our TP of RM5.57 is unchanged based on a CY15
EPS of 26.5 sen and target PER of 22x.
The c.20% premium ascribed to SKPETRO (versus the
18x PER ascribed to MHB) is justified, in our view, as it
is the only integrated Malaysian upstream player (from
E&P to installation).
Actual vs.
Expectations
SapuraKencana Petroleum (SKPETRO) reported 1Q15
core net profit of RM334.3m which was within our
expectations, accounted for 24.3% of our full-year
FY15 estimates and 22.9% of market consensus.
Our core net profit excludes the RM2.7m foreign
exchange loss and RM177.8m gain arising from
acquisition of Newfield.
Dividends A tax exempt single tier interim dividend of 1.35 sen
and special dividend of 1.0 sen was declared, which
came as a surprise to us as we have not factored any
dividend payout in FY15.
Key Results
Highlights
In 1Q15, core net profit soared 67.6% QoQ while
revenue rose 29.7% QoQ after the inclusion of SKEI
business financial results post completion of its
acquisition on 11 February 2014.
The 1Q15 core net profit surged 133.7% on a YoY
basis, primarily due to the inclusion of Seadrill’s tender
rig business and SKEI business post their acquisitions
in Drilling and Energy Services (DES) segment. PBT in
Offshore Construction and Subsea Services (OCSS)
segment leapt 46.6% YoY, despite the revenue
contracting 13.9% over the period, mainly due to higher
contributions from its JV on completion of Gumusut
project. PBT contribution from DES (+>100.0% YoY)
and OCSS (+46.6% YoY) which helped to mitigate the
decline in Fabrication, Hook-up and Commissioning
(FAB & HUC) segment (-13.2% YoY).
Outlook At our last count, SKPETRO’s orderbook stood at
RM30b after the EPCIC wins. Tender book was guided
to be within RM30b.
We believe SKPETRO is scheduled to: (i) begin the
new campaign for Pan-Malaysia Transport and
Installation (T&I) contract, (ii) receive two DLBs and
KM-2, (iii) kick-start two Brazilian pipelay-support
vessels (PLSV), and (iv) account for Newfield’s
earnings in CY14. All these will provide near-term
catalysts for the stock.
For Newfield projects; targets are to transform the
SK310 discoveries to 2P reserves by end-CY14. For
now, the resources are estimated to be at 1.5-3.0 tcf.
Change to
Forecasts
We maintain our forecasts for now given that the 1Q15
result is within expectations.
Rating Maintain OUTPERFORM
Valuation Our TP of RM5.57 is unchanged based on a CY15
EPS of 26.5 sen and target PER of 22x.
The c.20% premium ascribed to SKPETRO (versus the
18x PER ascribed to MHB) is justified, in our view, as it
is the only integrated Malaysian upstream player (from
E&P to installation).
Moreover, the stock is currently still attractively priced
at CY14-15 PER of 19.3-16.3x (vis-à-vis other
heavyweights such as UMW O&G that trades at CY14-
15 PER of 33.2-21.4x.
Risks to Our
Call
(i) Lower-than-expected margins for business
segments
(ii) Lower-than-expected contract replenishment.
at CY14-15 PER of 19.3-16.3x (vis-à-vis other
heavyweights such as UMW O&G that trades at CY14-
15 PER of 33.2-21.4x.
Risks to Our
Call
(i) Lower-than-expected margins for business
segments
(ii) Lower-than-expected contract replenishment.
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