Research firms bullish on SapuraKencana

PETALING JAYA: Research firms remain bullish on SapuraKencana Petroleum Bhd for its strong quality and well diversified order book, healthy earnings and consistent job wins.

MIDF Research in a note yesterday pointed out that it believes that its bullish stance on SapuraKencana is warranted given its track record in outperforming other oil and gas services companies in securing new jobs and posting billion ringgit earnings.

In view of this, MIDF is reiterating its 'buy' stance on the stock at a revised target price of RM5.36 a share.

The research firm pointed out that SapuraKencana's order book remains strong at US$8.3 billion (RM27 billion) while tenderbook value is almost similar to the current order book at RM25 billion.

About 49% of the its jobs are from Brazil, 31% in Malaysia, 14% from Southeast Asia, 5% from Australia and the rest from Africa.

"Although we have factored in these potential job wins, we are taking this opportunity to adjust our FY15 earnings estimates slightly higher by 2.4%. We are assuming lower financing costs from the recently undertaken debt restructuring exercise and also higher fleet utilisation rate," it said.

On Tuesday, SapuraKencana's drilling division won a fresh contract and three contract extensions worth collectively US$454 million (RM1.5 billion) in West Africa (Congo and Angola), Brunei and Thailand).

Hong Leong Investment Bank is also positive on SapuraKencana's latest award, maintaining its 'buy' view on the company with an unchanged target price of RM5.52 a share.

The bank is also positive about SapuraKencana with its strong balance sheet, knowhow and global trend towards offshore production.

"We expect more contract newsflow from the Africa region given its increasing exploration and production activities," it said.

In addition, the bank expect increasing fabrication job order going forward with more than RM10 billion estimated worth of potential contracts to be awarded.

It said several centralised processing platforms are likely to be awarded in 2014 such as Semarang, Bokur, Dulang, Guntong Baram Delta and Sepat.

"We believe the recent acquisition of Newfield's asset will help SapuraKencana to diversify its portfolio of business and gain immediate foothold and recognition as an upstream resource owner and operator," it added.