Analysts still not convinced with SapuraKencana
KUCHING: SapuraKencana Petroleum Bhd (SapuraKencana) has managed to book in a core net profit (CNP) of RM191.3 million in its first half of financial year 2017 (1HFY17) and while this has met 91 per cent of consensus full year estimates, analysts are still unconvinced of a turnaround for Skpetro.
As such, both research arms of Affin Hwang Investment Bank Bhd (Affin Hwang Capital) and Kenanga Investment Bank Bhd (Kenanga Research) have decided to maintain their full year estimates and market calls for Skpetro with unchanged target prices (TP).
Justification for this decision is due to anticipation of a much weaker 2H for Skpetro from both analysts.
“Given that 2H is the seasonally slower half for engineering and construction (E&C), coupled with the expiring of two tender rigs in the drilling segment, it is fair to assume that it will be challenging for management to maintain similar profitability like in the 1HFY17 assuming the current low oil price environment remains,” explained Affin Hwang Capital.
Within SapuraKencana E& C segment, second quarter financial year 2017 ( 2QFY17) revenue witnessed a decrease of 22 per cent quarter over quarter (QoQ) to RM796.7 million which is in line
Given that 2H is the seasonally slower half for engineering and construction (E&C), coupled with the expiring of two tender rigs in the drilling segment, it is fair to assume that it will be challenging for management to maintain similar profitability like in the 1HFY17 assuming the current low oil price environment remains. Affin Hwang Capital
with the expected lower activity level in the quarter.
Despite this drop, Kenanga Research requests investors to note that the E&C segment showcased a 53 per cent growth in profit before tax (PBT) which is largely attributed to recognition of higher-margined projects and better assets utilisation post monsoon.
As for the drilling segment, revenue fell to RM50.3 million in 2QFY17 which translates to a plunge of 67 per cent QoQ.
Affin Hwang Capital explains that this plunge was due to the drilling segment being dragged down by a lower utilisation rate of the group’s drilling rigs.
“However, it was partially offset by better joint venture (JV) and associate contribution, led by stronger earnings from PLSVs chartered to Petrobras as well as improvement in E&C segment,” argued Kenanga Research
“Basedonmanagementguidance of maintaing a total of eight operational tender rigs by year end, we are expecting another two to three more rigs to be stacked, effectively utlising only half of its total rigs count,” added Affin Hwang Capital.
Similarly, SapuraKencana energy segment also witnessed significant decrease in performance as earnings contribution fell from RM63.9 million to RM 6 million YoY.
This is largely due to lower production and weaker crude oil prices. Overall, SapuraKencana earnings witnessed a 79 per cent decrease from RM352.3 million in 2Q16 YoY, in line with a 40 per cent decline in top line.
Meanwhile, Kenanga Research also noted that SapuraKencana management “guided that all the profit and loss (P&L) impact arising from cessation of Berantai RSC has been recognised in 2Q17 and Petronas will reimburse the cash pay-out by June next year.”