SKPETRO (5218) - SapuraKencana Petroleum - A step closer towards shariah compliance
Target RM3.14 (Stock Rating: ADD)
SapuraKencana is set to return to the Securities Commission’s (SC) list of shariah-compliant securities in the May 2015 review following the release of the company’s FY1/15 audited accounts and the subsequent submission of the accounts to the SC. Earlier, in Jan, the inked an agreement with 11 banks for an Islamic facility valued at US$2.3bn, Malaysia’s largest Islamic facility. We continue to value the stock at 15x CY16 P/E, at parity with our target market P/E. SapuraKencana remains an Add, with the shariah-compliant status confirmation and strong order book momentum as potential re-rating catalysts.
What Happened
SapuraKencana released its FY1/15 audited accounts yesterday as it moved a step closer towards regaining its shariah-compliant status. As at 31 Jan 2015, the company’s borrowings amounted to RM17bn and total assets stood at RM34.6bn. The company on 15 Jan signed an agreement with 11 local, regional and international banks for an Islamic facility valued at US$2.3bn (RM8.3bn), Malaysia’s largest Islamic facility. Later, on 30 Jan, the company converted RM7bn of its existing multi-currency facility into a facility based on shariah principles of Murabahah at an unchanged rate of 0.95-2.5%, plus cost of funds/LIBOR. Post-conversion, the company’s total conventional borrowings over total assets was reduced to 29% from 49%, thus meeting the SC’s shariah requirement. The SC’s shariah threshold is 33%.
What We Think
We are encouraged that management has taken the initiative to meet the SC’s requirement for shariah compliance. We understand that the audited accounts have been submitted to the SC. The next step is an approval from the SC’s shariah council. The SC’s latest shariah-compliant securities list will be released on 29 May. The list is released twice a year, on the last Fridays of May and Nov. To recap, SapuraKencana was removed from the SC’s shariah list in the Nov 2014 review.
What You Should Do
Accumulate SapuraKencana shares. A robust order backlog of RM25.7bn and good leverage in the international market give the company an edge over its peers. The stock’s expected return to the SC’s shariah list is an added plus.
Source: CIMB Daybreak - 17 April 2015
Target RM3.14 (Stock Rating: ADD)
SapuraKencana is set to return to the Securities Commission’s (SC) list of shariah-compliant securities in the May 2015 review following the release of the company’s FY1/15 audited accounts and the subsequent submission of the accounts to the SC. Earlier, in Jan, the inked an agreement with 11 banks for an Islamic facility valued at US$2.3bn, Malaysia’s largest Islamic facility. We continue to value the stock at 15x CY16 P/E, at parity with our target market P/E. SapuraKencana remains an Add, with the shariah-compliant status confirmation and strong order book momentum as potential re-rating catalysts.
What Happened
SapuraKencana released its FY1/15 audited accounts yesterday as it moved a step closer towards regaining its shariah-compliant status. As at 31 Jan 2015, the company’s borrowings amounted to RM17bn and total assets stood at RM34.6bn. The company on 15 Jan signed an agreement with 11 local, regional and international banks for an Islamic facility valued at US$2.3bn (RM8.3bn), Malaysia’s largest Islamic facility. Later, on 30 Jan, the company converted RM7bn of its existing multi-currency facility into a facility based on shariah principles of Murabahah at an unchanged rate of 0.95-2.5%, plus cost of funds/LIBOR. Post-conversion, the company’s total conventional borrowings over total assets was reduced to 29% from 49%, thus meeting the SC’s shariah requirement. The SC’s shariah threshold is 33%.
What We Think
We are encouraged that management has taken the initiative to meet the SC’s requirement for shariah compliance. We understand that the audited accounts have been submitted to the SC. The next step is an approval from the SC’s shariah council. The SC’s latest shariah-compliant securities list will be released on 29 May. The list is released twice a year, on the last Fridays of May and Nov. To recap, SapuraKencana was removed from the SC’s shariah list in the Nov 2014 review.
What You Should Do
Accumulate SapuraKencana shares. A robust order backlog of RM25.7bn and good leverage in the international market give the company an edge over its peers. The stock’s expected return to the SC’s shariah list is an added plus.
Source: CIMB Daybreak - 17 April 2015
