SKPETRO (5218) - SapuraKencana Petroleum - Gems of assets
Target RM3.14 (Stock Rating: ADD)
SapuraKencana’s pipelay support vessel (PLSV) Onix is ready to be dispatched to work for Petrobras in Brazilian waters in about a month’s time, we learned from a meeting with the company today. Like the earlier two PLSVs, Diamante and Topazio, Onix will be an early delivery. We expect a steady rise in net profits from the operations in Brazil as more PLSVs are deployed. We continue to value the stock at 15x CY16 P/E, at parity with our target market P/E. SapuraKencana remains an Add, with shariah-compliant status confirmation and strong order book momentum as potential re-rating catalysts.
What Happened
SapuraKencana’s unit in Brazil, Sapura Navegacao, is set to deploy Onix in about a month’s time, earlier than the original contract date (Figure 1). The two earlier PLSVs, Diamante and Topazio, were also delivered earlier than scheduled. Diamante and Topazio, which commenced operations in Jun and Sep 2014, respectively, have been enjoying an average utilisation rate of 99%. The monthly payments from Petrobras have been on time. To recap, Sapura Navegacao, a 50:50 JV between SapuraKencana and Seadrill, has two contracts with Petrobras. In Nov 2011, Sapura Navegacao secured a 5+5 US$1.4bn contract to charter and operate three PLSVs, which include Diamante and Topazio. The second contract, which was awarded in Jun 2013, is worth US$2.7bn. The 8+8 contract calls for the services of three additional PLSVs, which include Onix.
What We Think
It is encouraging that Sapura Navegacao’s operations are on track. We expect net profit contributions from SapuraKencana’s 50% share in Sapura Navegacao to rise progressively from RM17m in FY1/15 to around RM50m in FY1/16 and RM150m in FY1/17 as more PLSVs are rolled out. Construction of the fourth PLSV, Esmerelda, is 80% completed.
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 Securities Commission’s shariah list next month is an added plus.
Source: CIMB Daybreak - 20 April 2015
Target RM3.14 (Stock Rating: ADD)
SapuraKencana’s pipelay support vessel (PLSV) Onix is ready to be dispatched to work for Petrobras in Brazilian waters in about a month’s time, we learned from a meeting with the company today. Like the earlier two PLSVs, Diamante and Topazio, Onix will be an early delivery. We expect a steady rise in net profits from the operations in Brazil as more PLSVs are deployed. We continue to value the stock at 15x CY16 P/E, at parity with our target market P/E. SapuraKencana remains an Add, with shariah-compliant status confirmation and strong order book momentum as potential re-rating catalysts.
What Happened
SapuraKencana’s unit in Brazil, Sapura Navegacao, is set to deploy Onix in about a month’s time, earlier than the original contract date (Figure 1). The two earlier PLSVs, Diamante and Topazio, were also delivered earlier than scheduled. Diamante and Topazio, which commenced operations in Jun and Sep 2014, respectively, have been enjoying an average utilisation rate of 99%. The monthly payments from Petrobras have been on time. To recap, Sapura Navegacao, a 50:50 JV between SapuraKencana and Seadrill, has two contracts with Petrobras. In Nov 2011, Sapura Navegacao secured a 5+5 US$1.4bn contract to charter and operate three PLSVs, which include Diamante and Topazio. The second contract, which was awarded in Jun 2013, is worth US$2.7bn. The 8+8 contract calls for the services of three additional PLSVs, which include Onix.
What We Think
It is encouraging that Sapura Navegacao’s operations are on track. We expect net profit contributions from SapuraKencana’s 50% share in Sapura Navegacao to rise progressively from RM17m in FY1/15 to around RM50m in FY1/16 and RM150m in FY1/17 as more PLSVs are rolled out. Construction of the fourth PLSV, Esmerelda, is 80% completed.
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 Securities Commission’s shariah list next month is an added plus.
Source: CIMB Daybreak - 20 April 2015
