Sapura Energy down on downgrades after profit miss

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KUALA LUMPUR (Dec 6): Sapura Energy Bhd's share price fell as much as 0.5 sen or 1.89% to 26 sen in morning trades today among Bursa Malaysia's most-active stocks after the oil and gas support services provider reported a wider quarterly net loss which missed market forecast. Such sentiment prompted analysts to cut their target prices (TP) for the stock.  

Yesterday, Sapura Energy said net loss widened to RM100.89 million in the third quarter ended Oct 31, 2019 (3QFY20) from a RM31.09 million net loss a year earlier. For 9MFY20, Sapura Energy said net loss widened to RM326.3 million from a RM292.88 million net loss a year earlier.

Today, CGS-CIMB analyst Raymond Yap wrote in a note that despite Sapura Energy's  uninspiring 9MFY20 results and CGS-CIMB's upward revision of its
Sapura Energy core net loss estimate for FY20 at RM597 million from a RM516 million core net loss, FY20 performance is still expected to be better than FY19’s core net loss of RM939 million.

Yap said this is because 4QFY19 saw Sapura Energy's engineering and construction division making provision for contractual losses arising from its Pengerang onshore fabrication project.

"We have not forecast such an event to repeat in FY20. Furthermore, the Larak field at SK408 is expected to begin production this month, while the Gorek and Bakong fields will come online by mid-CY20, helping to moderate losses in FY21," Yap said.

He said CGS-CIMB lowered its Sapura Energy share TP to 29 sen from 31 sen while maintaining its hold call on the stock.

Meanwhile, Affin Hwang Investment Bank Bhd analyst Tan Jianyuan wrote in a note today the research firm lowered its Sapura Energy share TP to 28 sen from 30 sen with an unchanged hold call.

"Sapura Energy's 9MFY20 (core loss) missed expectations again on higher drilling segment losses and lower JV profits," Tan said.

At 10:04am today, Sapura Energy shares were traded unchanged at 26.5 sen with some 15 million units traded. At 26.5 sen, Sapura Energy has a market capitalisation of RM4.22 billion.