Maybank IB: Sapura Energy CEO Shahril's planned retirement an 'unexpected surprise'

-A +A

KUALA LUMPUR (Sept 22): Surprising and unexpected. Both words encapsulate analysts' sentiment today after Sapura Energy Bhd announced yesterday its president and group CEO Tan Sri Shahril Shamsuddin is planning to retire.

Maybank Investment Bank Bhd (Maybank IB) analyst Liaw Thong Jung wrote in a note today that while this corporate move is an unexpected surprise, Sapura Energy's debt refinancing and cost-reduction exercises remain the oil and gas support services provider's key priorities.

"A market-surprise move, timing-wise," Liaw said.

AmInvestment Bank Bhd analyst Alex Goh wrote in a note today AmInvestment is surprised by Shahril's planned retirement, as Sapura Energy, which started as a diving contractor, has been a part of the group of companies started by Shahril’s family.

"Also, he did not provide any indication of his retirement during an analyst briefing last Friday," Goh said.

Yesterday, Sapura Energy announced in a statement that Shahril is planning to retire after leading the group for 25 years. The group said Shahril will step down from his post upon reaching the retirement age of 60 on March 22, 2021.

"Sapura Energy’s board of directors has appointed Datuk Mohd Anuar Taib as chief operating officer and CEO designate effective Oct 1, 2020, as part of a six-month transition," the company said.

Today, Maybank IB's Liaw said that in the research firm's opinion, Sapura Energy's recapitalisation is urgently needed for the company's survival.

"Sapura Energy is highly leveraged, at 1x net gearing and 15x net debt/EBITDA. We do not rule out another round of cash call to recapitalise its balance sheet," the analyst said.

AmInvestment's Goh said Sapura Energy's huge debt of about RM10 billion still needs to be refinanced with 14 banks by December 2020.

He said this "could mean additional equity-raising exercise in the pipeline that will translate to massive (earnings per share) dilution given the current low share price".

At the time of writing this report today, Sapura Energy had not issued a statement in response to analysts' speculation on another round of cash call and additional equity-raising in the company.

At Bursa Malaysia's 12:30pm break today, Sapura Energy's share price settled unchanged at 12 sen, bringing the company's market capitalisation to about RM1.92 billion. Some 54 million shares changed hands.

Maybank IB maintained its "sell" call for Sapura Energy shares with an unchanged target price (TP) of six sen, according to Liaw.

Goh said AmInvestment maintained its "sell" call on Sapura Energy with an unchanged TP of five sen.

Read also:
Sapura Energy’s boss Shahril Shamsuddin to pass baton to Anuar Taib in March 2021

Chong Jin Hun