Sapura Energy performance exceeds analysts’ expectations

PETALING JAYA: Sapura Energy Bhd’s performance for the financial year ended Jan 31, 2017 (FY17) exceeded analysts’ expectations, raking in a net profit of RM208.32 million compared with a net loss of RM791.56 million a year ago.
Kenanga Research said that the FY17 core net profit exceeded its full-year estimate by 14% largely due to stronger than expected contribution from the engineering and construction segment and its joint venture earnings.
It upgraded its FY18E earnings by 10% to RM221.2 million, assuming higher contribution from pipelay support vessels chartered to Petrobras and introduced FY19E earnings of RM213.8 million, assuming full contribution of B15 project, 50% utilisation from drilling segment and total order book replenishment of RM4.5 billion. Kenanga Research maintained its “outperform” call with a higher target price of RM2.24.
“We believe a higher premium is warranted in view of its competitive advantage in winning local and overseas contracts continuously and its long-term positioning as an integrated service player as well as a gas producer with decent gas reserves,” it said in its report yesterday.
PublicInvest Research said Sapura Energy met more than 100% of its revenue and PATAMI estimates for FY17. However, it adjusted earnings for the drilling and energy divisions to reflect a decline of about 20-30% of FY18F onwards lower estimates.
It maintained its “outperform” view with a lower target price of RM2.08, on the back of continued weakness in the group’s drilling division coupled with lower energy performance on non-contribution of the Berantai RSC from FY18 onwards.
In its report, PublicInvest Research said the group’s cashflow is strengthening, with cash holding of RM3.5 billion at end FY17 while net debt to equity ratio reduced to 1.16 times for FY17 with the paring down of borrowings worth RM1.1 billion in FY17.
“We understand that the remaining debt is backed by assets that are supported by contracts coupled with sustained positive uptrend of operating cashflows, thus no cause for concern.
“We are affirmed of Sapura Energy as a strong operational and reputable player, enhanced by its contract wins to date and its operations remaining on track. In this challenging period, the group has put itself on a strong financial footing, which includes right sizing the organisation for better efficiencies, which we believe would continue to weather them through these lower oil price scenarios,” it said.
Meanwhile, Maybank Investment Bank Research, which maintained its “buy” call and target price of RM2.30, raised its FY18 earnings by 2.1 times, mainly to account for lower drilling operating expenditure and higher associate profits.