Mixed view on earnings outlook of Sapura Energy

PETALING JAYA: Analysts are divided over Sapura Energy Bhd’s earnings outlook.

For the third quarter ended Oct 31, 2018, Sapura Energy narrowed its net loss by over 88% to RM31.09mil, led by higher topline and a net foreign exchange gain of RM56.16mil.

For comparison, the group recorded a net loss of RM274.41mil in the previous year’s corresponding quarter.

Nonetheless, this was still the company’s fifth consecutive quarter of net losses.

Sapura Energy’s revenue rose by 17.36% year-on-year to RM1.5bil, mainly attributable to the higher revenue contribution from its engineering and construction (E&C) as well as the exploration and production segments.

However, analysts at RHB Research have reduced Sapura Energy’s target price to 46 sen from 49 sen, while Maybank IB Research reduced its target price from RM1.20 to 55 sen.

Maybank IB Research said while a recovery is in motion, it has lowered its target price to 55 sen to account for Sapura Energy’s sale of its 50% energy operations and rights issue exercise.

Last month, Sapura Energy inked a share subscription agreement and shareholders’ agreement with OMV AG to sell a 50% stake in its E&P unit – Sapura Upstream Sdn Bhd – for US$975mil (RM4.1bil).

The transaction is expected to be completed by the first quarter of 2019.

Meanwhile, CIMB CGS has maintained its “add” call and raised the target price to 57 sen, saying that the “cumulative nine months of financial year 2019 (FY19) core net loss of RM402mil made up 68% of our full-year forecast, in line with expectations, as the forecast fourth-quarter core net loss is expected to be wider.”

UOB KayHian has maintained its “hold” call for the stock on the basis of a better investment in the horizon from Jan 19, “to factor in the completion of the exercises as well as more certain earnings upgrades from delivery of new contracts.”

“Sapura Energy’s cumulative nine-month results were hampered by taxes but improved operationally in tandem with our expectations for a stronger second half,” it said.

UOB KayHian valued Sapura Energy’s stock at 34 sen, from 42 sen previously.

Analysts from RHB Research and JF Apex stated that they are confident with Sapura Energy’s order book replenishment as its overall bid book increased to RM18.6bil, which is the highest in 24 months from RM16.9bil last quarter.