SapuraKencana Petroleum Bhd (SapuraKencana) is set to be propelled into the pool of top offshore services providers in the world as it anticipates seven new vessels to be delivered within the next two years.
According to HwangDBS Vickers Research Sdn Bhd (HwangDBS Vickers) analyst, Quah He Wei, “We expect positive news flow for the company as it will be busy tendering for Petronas jobs in the coming few months.
“Contracts in the pipeline include Pan Malaysia hook-up commissioning jobs worth RM10 billion, inspection, repair and maintenance contracts worth RM800 million and fabrication projects worth more than RM3 billion.”
The analyst noted that all of the services were offered under SapuraKencana’s established integrated operations.
Quah also stated that the award of marginal fields contracts at Tembikai and Cenang, expected to be by the fourth quarter of 2012 could be a catalyst for the company. SapuraKencana has, year-to-date, secured RM3 billion new orders, thereby meeting the research house’s financial year 2013 (FY13) forecast.
“The full year impact of marginal field contribution in FY14 will be its immediate growth driver. The seven new vessels to be delivered within the next two years will expand SapuraKencana’s geographical coverage,” said Quah as he predicted the enlarged fleet would turn the company into one of the top offshore services providers in the world.
Being the only integrated oil and gas (O&G) player in Malaysia that offers full spectrum of services across the industry value chain, coupled with its solid partnerships with global players such as Seadrill, Subsea7 and L&T, SapuraKencana is believed to be the top contender to bag major contracts.
“Its maiden foray into Brazil with its US$1.4 billion pipelay vessel charter contracted secured in November marks the beginning of its aggressive global expansion,” said the HwangDBS Vickers analyst.
Quah believed that should long-time partner, Seadrill’s initial public offering plan materialised, SapuraKencana’s Brazilian venture could be a catalyst as the 50:50 joint venture might be injected into the listed entity.
The analyst was positive on the resilient earnings that the O&G company derived from long-term drilling and installation contracts. This was believed to make SapuraKencana less susceptible to oil price volatility.
“Given its unrivalled ownership of quality assets, SapuraKencana is poised to be the leading O&G player, not only in Malaysia, but also in the region, going forward,” he explained.
As such, he went on to cut FY13 forecasted earnings by 21 per cent after stripping out Kencana’s fabrication contribution for January to May 2012 as the merger was completed in late May. Quah pegged target price of RM2.70 per share for the company implying 15 per cent upside potential.
“SapuraKencana remains the cheapest large-cap O&G stock in Malaysia at 16 times FY14 earnings per share, despite boasting the largest RM14.3 billion orderbook and unrivalled integrated services under its belt,” he added.