SapuraKencana Petroleum Bhd
(May 12, RM2.73)
Maintain buy with an unchanged target price (TP) of RM3.21: SapuraKencana Petroleum secured almost RM1billion worth (US$269 million) of contracts from Mexico, Indonesia, India and Vietnam. 

The company made its first foray into Mexico with a job to deploy its pipe-laying vessel SapuraKencana 3500 in the Gulf of Mexico. The contract value is between US$41.2 million and US$98.1 million.

SapuraKencana, through a consortium with PT Encona Inti Industri, secured a US$97.5 million award for transportation and installation of a gas pipeline in Central Java.

The company also secured three jobs for installation of structures and pipelines from Vietnam and one transport and installation contract from India with a combined value of US$73.5 million.

Following this development, the company’s order book stands at around RM26 billion.

Earnings outlook is maintained as we have accounted for the contract wins in our financial year 2016 (FY16) forecast. Following last quarter’s kitchen-sinking, we expect the FY16 ending Jan 31, 2016, revenue and net profit to grow 12% year-on-year and 17% respectively.

Future challenges would be to replenish its order book with a burn rate of RM9 billion in FY15 as oil and gas players will fight for lesser jobs in the market at lower profit margins.

We reiterate a “buy” call at an unchanged TP of RM3.21 based on FY16 earnings per share forecast of 25.7 sen and forward industry price-earnings ratio of 12.5 times. — JF Apex Securities Bhd, May 12

This article first appeared in The Edge Financial Daily, on May 13, 2015.