SapuraKencana 3Q results meet analysts’ expectations

Borneo Post Online: 10 Dec 2013

KUCHING: SapuraKencana Petroleum Bhd’s (SapuraKencana) third quarter of financial year 2014 (3QFY14) and first nine months (9M) results were in line with analysts’ expectations driven by its high activity levels.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), SapuraKencana reported 3QFY14 core net profit of RM269.3 million which brought 9M14 net profit to RM711.8 million, within it’s expectations at 74 per cent of it’s full-year forecasts (RM962.7 million) but was slightly below consensus full-year estimates (RM1.02 billion) at 69.7 per cent.

It was also generally within HwangDBS Vickers Research Sdn Bhd’s (HwangDBS Vickers Research) expectations with analyst Quah He Wei stating that the company’s 3QFY14 core profit of RM261 million took it’s 9M14 earnings to RM670 million or 70 per cent of the research house’s forecast.

As for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), analyst Aaron Tan Wei Min noted that SapuraKencana’s 9M14’s earnings of RM749.7 million broadly kept pace with the research arm’s and consensus full year’s estimates.

“With the integration of Seadrill’s tender rigs business and also the progress for the Berantai RSC, we believe that full year earnings are achievable,” Tan said.

High activity levels are expected to be sustained, especially in the fabrication and hook-up commissioning (HUC) segment, as more projects come on-stream. In addition, the OCSS segment will continue to see encouraging performance, he added.

Overall, MIDF Research said it was still bullish on SapuraKencana and is maintaining its ‘buy’ recommendation on the stock at a target price of RM4.86 per share, on the back of a forward price earnings ratio 2015 (PER) of 20-fold and earnings per share 15 (EPS15) of 24.3 sen.

“Although potential upside is now less than 15 per cent, we are still maintaining our buy recommendation as there is a possibility of a stock rerating pursuant to the recently purchased fields from Newfield Co,” Tan explained.

Similarly, HwangDBS Vickers Research maintained it’s ‘buy’ call on the stock and raised the target price to RM5.90 per share following it’s earnings upgrade.

The research house had raised the company’s FY15 to FY16 forecast earnings by 22 per cent and 20 per cent, respectively after incorporating contribution from the producing fields of Newfield Malaysia.

“We continue to like SapuraKencana as its unrivalled integrated offshore services will naturally place it among the frontrunners to secure mega projects in Malaysia as well as overseas,” Quah projected.

As for Kenanga Research, given that earnings were within its expectations, the research arm maintained its forecasts on the company for now.

Furthermore, it maintained ‘outperform’ on the stock with a target price of RM5.81 per share based on an implied target PER of 27.1-fold on current year 2014 EPS of 21.4 sen to account for proformance net profits assuming a nine-month contribution.

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