Scomi Energy’s 1QFY17 slightly below expectations

KUCHING: Scomi Energy Services Bhd’s (Scomi Energy) first quarter of financial year 2017 (1QFY17) results came in slightly below analysts’ expectations.

In a filing on Bursa Malaysia, Scomi Energy reported that group loss before tax for the current quarter was RM17.8 million due to lower revenue and fixed costs in place, particularly in marine services.

According to the research arm of Hong Leong Investment Bank Bhd ( HLIB Research), Scomi Energy reported 1QFY17/03 core loss of RM18 million against its expectations of a full year FY17 profit of RM47 million.

This was reportedly on the back of slower than expected performance from drilling fluid business due to slow down in drilling activities.

“With oil prices remaining highly volatile for the year, we do not expect a significant pick up in drilling activities anytime soon with oil producers opting to stay pat amid high uncertainties in oil prices,” HLIB Research said.

Moving to 2017, the research arm believed outlook for drilling could improve as the oil market rebalances with lagged effects of oil majors capital expenditure (capex) cut to be felt sometime in the year.

On a side note, the research arm pointed out that first oil of Scomi Energy’s Ophir marginal field has been rescheduled to mid-2017 as the group looks to further streamline its cost structure.

It also highlighted that weak performance of the group’s marine division is expected to continue for the remaining quarters in current year 2016 CY16 due to current oversupply of marine vessels and subdued activity in the oil and gas industry.

On the forecasts, HLIB Research cut FY17 forecast to a loss of RM34 million as the research arm adjusted for significantly lower drilling business revenue.

“Losses are expected to be seen in the subsequent quarters,” it said.

Valuation-wise, Scomi Energy’s target price was reduced to RM0.18 per share, from RM0.19 per share previously. All in, HLIB Research maintained its ‘ hold’ call on the stock.

“Despite disappointment in its earnings, we believe it’s largely priced in by the market and its valuations have bottomed around this level,” the research arm said.