CIMB Research maintains Outperform on SapuraKencana
KUALA LUMPUR: CIMB Research has maintained its Outperform rating on SapuraKencana with a target orice of RM6.65 as it continued to value the stock stock at 22.3 times CY15 P/E, a 40% premium over its CY15 target market P/E of 15.9 times.
“The recently-announced Newfield purchase is a major re-rating catalyst that supports our Outperform call. SapuraKencana is our top pick among the oil & gas big caps,” it said on Monday.
It added Petronas said that it has awarded a 13-package, five-year offshore hook-up, commissioning and maintenance contract worth about RM10bil to six local contractors, namely Kencana HL, Dayang, Petra Resources, PBJV, Carimin and Sigur Ros.
“Kencana HL is a wholly-owned unit of SapuraKencana. Petra Resources is owned by Petra Energy while PBJV is the parent company of Barakah.
“The contract is one of Petronas's largest service contracts currently in place. Its partners for the contract are Petronas Carigali, Shell, ExxonMobil, Murphy, Hess, Newfield, Nippon and Talisman,” it said.
CIMB said it has confirmed with the SapuraKencana that this is not a newly-awarded contract.
“The company secured two of the 13 packages earlier this year, and works are ongoing.
“The two packages are worth around RM800mil, or 3% of the company's order book. We understand that 60% of the works require the provision of various offshore support vessels (OSVs), which SapuraKencana sources mostly internally from its expansive fleet,” it said.
CIMB said investors should accumulate SapuraKencana shares.
“The two packages are keeping the company's yard and OSVs busy, but the real excitement is in Seadrill and Newfield, which give longer earnings visibility for SapuraKencana.
“The stock now offers a robust 3-year EPS CAGR of 43%, almost double the sector average of 23%,” it said.
