KUALA LUMPUR (June 4): While Sapura Energy Bhd has just announced that it had bagged five new contracts worth RM766 million combined, analysts appear unconvinced by the new jobs' contributions to the group in the near term.

The new job wins are estimated to bring the group's existing order book to RM14.3 billion, which undoubtedly will ensure visibility to the group's top-line numbers for the next few years, PublicInvest Research analyst Nurzulaikha Azali said in a report today.

However, she noted that the "contribution to earnings is unconvincing given the thin profit margin at the early stage of commencement", coupled with the current operating climate that could delay the implementation.

Should oil prices sustain at current low level for a longer period, Nurzulaikha said there are risks of deferment and revision for the contract terms and value.

She wrote that the group deferred its financial year 2021 (FY21) order book burn rate of around RM600 million to RM800 million to FY22 during its results for the fourth quarter of FY20 at the end of April, resulting FY21 top line to contract around 15%. "More and more deferments are likely, given the current operating climate," said Nurzulaikha.

There are no adjustments to the earnings estimates as the new wins are already accounted for in the yearly replenishment assumption, she said.

The group is expected to report a loss of RM612.4 million in FY21 and will remain in loss at RM408 million in FY22 and RM194.3 million in FY23 as profit margins for Engineering and Construction and drilling will get hit due to lower utilisation.

Nurzulaikha maintains an "underperform" call for Sapura Energy with an unchanged target price of six sen.

Meanwhile, Kenanga Research's Steven Chan, in a report today, wrote that even with these new wins, Sapura Energy still lacks earnings visibility.

"Despite being positive about the job wins, we deem them insufficient to restore any resemblance of earnings visibility for the company," said Chan, adding that he holds firm on the view that the company would only possibly stage an earnings turnaround beyond FY22.

"We expect these jobs to fetch approximately low-teens operating margins, although earnings recognition would most likely be back loaded to later stages of job progression," Chan said.