Friday 29 Mar 2024
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KUALA LUMPUR (March 21): JF Apex Research has ceased coverage of Sapura Energy Bhd, citing the group's challenging earnings outlook, tightened liquidity and high debt level, after it posted record losses in its latest financial quarter.

"Thus, the stock is assigned as 'not rated' with our last target price of 4.5 sen based on -2 standard deviation on its three-year mean P/B.

"Investors should no longer depend on any of our financial forecasts and target price in making investment decisions," it said in a note on Monday (March 21).

Last Friday (March 18), the beleaguered oil and gas outfit reported that its net loss for the fourth quarter ended Jan 31, 2022 (4QFY22) had widened to a massive RM6.61 billion, compared with a net loss of RM216.03 million a year ago.

The epic losses were largely attributable to impairment on goodwill of RM3.29 billion and impairment on property, plant and equipment worth RM2.1 billion.

Meanwhile, quarterly revenue plummeted 68.1% to RM453.14 million from RM1.44 billion in the previous year, mainly due to lower percentage of completion recognised in the current quarter resulting from recognition of foreseeable losses and higher project costs in the engineering and construction (E&C) business segment.

"Sapura’s orderbook declined to RM6.6 billion from RM7.6 billion last quarter. Out of the orderbook, RM5 billion is expected to be booked in FY23, RM1 billion in FY24 and RM600 million in FY25. Its bid book stands at RM22 billion. Tightened cashflow could restrict Sapura’s financial ability to bid for more jobs going forward.

"Sapura’s debt and cash stands at RM10.6 billion and RM717 million respectively. Following the recent winding down petitions served to its subsidiaries, Sapura was granted two court orders to begin a debt restructuring exercise by negotiating with its vendors and lenders within a year. The restructuring plan could include haircuts, issuing shares and disposal of stake in its fabrication, drilling and exploration divisions," noted JF Apex Research.

For the financial year ended Jan 31 (FY22), the group's net loss swelled to its highest yet at RM8.9 billion, from a net loss of RM160.87 million in the prior year as it realised impairment on goodwill and property, plant and equipment worth RM5.39 billion collectively.

Meanwhile, annual revenue fell by 22.84% to RM4.13 billion from RM5.35 billion in FY21 due to lower contribution from its E&C, and operation and maintenance (O&M) segments. 

JF Apex said its earnings were below its FY22 estimates of RM2.5 billion in net losses while its revenue fell short of the research house's projected RM5.2 billion.

Sapura Energy was the second-most actively traded stock on Bursa Malaysia this morning, falling half a sen or 12.5% to 3.5 sen, with 18.31 million shares changing hands. It had a market capitalisation of RM559.27 million.

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