Friday 29 Mar 2024
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KUALA LUMPUR (April 28): Sapura Energy Bhd was among the most actively traded stocks this morning amid mixed reviews from analysts after the group secured oil and gas contracts worth RM1 billion while reporting a smaller net loss in the fourth quarter ended Jan 31, 2021 (4QFY21).

Sapura Energy rose as much as one sen or 7.69% to 14 sen in early trades. At 10.19am, the counter pared some gains at 13.5 sen, still up five sen or 3.85%.

The counter, which was the fifth most actively traded stock, saw 66.32 million shares changed hands.

MIDF Research’s analyst Kifni Kamaruddin maintained his "buy" call on Sapura Energy with an unchanged target price (TP) of 16 sen as he continued to view Sapura Energy’s future prospects positively given that the operating environment worldwide has improved since mid-2020, underpinned by higher oil prices that have rebounded significantly to US$60 per barrel levels, which will benefit the group's engineering and construction (E&C) as well as exploration and production (E&P) segments.

“Additionally, Sapura Energy is well-positioned to potentially win more contracts given its width and depth of expertise in providing various oil and gas-related services,” he added in a note today.

He also said inclusive of the latest award of contracts totalling approximately RM1 billion, Sapura Energy’s orderbook remains robust at RM13.7 billion (up from RM12.8 billion in February 2021) with cumulative contract wins of RM5 billion year-to-date.

While the group’s earnings (net loss of RM216 million) in 4QFY21 were below expectation, he noted the group’s topline, which jumped 29.8% year-on-year to RM1.44 billion in 4QFY21 was above expectation.

“It is most notable that approximately 80% of FY22 revenue has been secured to-date and the management of Sapura Energy anticipates revenue in the current financial year to exceed FY21. Hence, we are revising upward our FY22 revenue projection by 10% to RM6 billion.

“However, the management also indicated that some of the Covid-19-related operational expenditures may persist into FY22 thus we lowered our earnings before interest and tax (EBIT) margin assumption by 1 percentage point to 10%. These changes resulted in a marginally higher FY22 earnings forecast of RM101.7 million (from RM100.8 million),” he said.

Meanwhile, Affin Hwang Capital’s analyst Tan Jian Yuan reiterated his "sell" call on Sapura Energy with an unchanged TP of 10 sen, as he sees the stock remains unattractive due to a lack of near-term catalysts.

“After completing its RM10 billion debt restructuring, which has been extended by a further seven years, the checklist-before-a-recovery remains lengthy, with its stubbornly high cost base being the biggest issue, along with its high net gearing level of 1.1 times,” he added.

Despite the contract wins of RM1 billion, he opined that the market isn’t likely to view this optimistically as competition may have been even fiercer to secure these jobs amid the current challenging environment, leading to even thinner margins.

“Moreover, the early phase of contract execution often has lower margins, so we do not expect any excitement in earnings over the near term,” he said.

He also said Sapura Energy’s 4QFY21 results were dragged down by higher costs and weaker associate profits, despite revenue growth.

“Full-year FY21 core losses narrowed 77% year-on-year to RM201 million, but missed our previous forecast (RM68 million) and the consensus (RM113 million),” he added.

Edited BySurin Murugiah
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