Improving prospects at Sapura Energy after share overhang resolution
KUCHING: AmInvestment Bank Bhd (AmInvestment Bank) is expecting vast improvements in Sapura Energy Bhd’s (Sapura Energy) prospects following the resolution of its share overhang.
In a company update report, the bank said prospects of the integrated oil and gas services provider has been steadily improving with increased orders and higher yard utilisation rates after the completion of its RM4 billion rights issue.
“Fears of undersubscription on the 18.5 per cent or 1.8 billion ordinary shares out of the RM3 billion rights shares issued at RM0.30 per share on a 5-for-3 basis have been alleviated as the underwriters have managed to completely dispose of the shares without causing any significant price swings.”
And together with the completion of the sale of the 50 per cent equity stake in Sapura Upstream to Austrian based OMV Aktiengesellschaft for US$ 1.6 billion, the bank expects Sapura Energy’s net profit to surge by 2.2 times for FY20F and 46 per cent for FY21F from substantive cuts in interest costs.
“Additionally, this will cut the group’s FY20F net gearing from 1.7-fold to a comfortable 0.5-fold,” the report added.
In terms of projects, Sapura Energy has managed to secure three rig drilling charters and 2 offshore jobs worth RM760 million in January alone. These awards include EPCC works for Petronas’ floating LNG Satu from the Kanowit field to the Kebabangan cluster off Sabah which is expected to be completed in the third quarter of 2020 (3Q20).
“Additionally, we have become more confident of Sapura Energy’s improving earnings prospects which currently stems overseas, principally in the Middle East, Brazil, Gulf of Mexico and West Africa.
“Selected as one of Saudi Aramco’s four new longterm agreement programme contractors late last year, substantive order book expansions are still likely from Sapura’s current tender book of US$8.5 billion with prospective bids of US$14.3 billion,” added the bank.
These expansions are highlighted in the group’s new orders worth RM9.3 billion financial year- to- date, which translates to 2.3 times the RM2.8 billion jobs it had secured in FY18 and an outstanding orderbook of RM17.7 billion which is circa 3 times its forecasted FY20 revenues.