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Wednesday, March 25, 2015

SKPETRO – Fundamental Analysis (25 Mar 2015) - L. C. Chong

SKPETRO Analysis:-
My View:-
  • Valuation:
    • Absolute EY%:
      • Trailing:
        • FY15 (EPS: 0.193) – Fair value 4.43 (Fair Value Uncertainty: LOW)
        • R4Q (EPS: 0.239) – Fair value 5.49 (Fair Value Uncertainty: LOW)
      • Forward:
        • FY16 (EPS: 0.19) – Fair value 4.37 (Fair Value Uncertainty: LOW)
        • FY17 (EPS: 0.212) – Fair value 4.87 (Fair Value Uncertainty: LOW)
      • EPS applied to reach the current stock price (2.3): 0.1
    • As for DCF, as SKPETRO does not disclose details of Operating Cash Flow, I will calculate DCF after SKPETRO releases Annual Report 2015.
  • 25 Mar 2015 – Orderbook remains healthy at approximately RM25.7b, stretching up to year 2024, with approximately RM19b in extension options.
    • 25 Mar 2015 – At the end of FY15 (2.6x of FY15 revenue) with 28% (RM7.3 billion) and 21% (RM5.5 billion) would be burned-out in FY16 and FY17 respectively.
  • Valuation of SKPETRO is very attractive as the company’s locked-in order book remains solid and that its oil fields are still in the black.
  • In FY15, SKPETRO FY15 normalised earnings rose by 6% yoy to RM1,154m
  • The DES and Fab & HUC segments registered topline growth with the exception of OCSS segment. DES segment remains as the key contributor with almost equal PBT contribution from Energy and Drilling.
  • The company has locked-in approximately >RM7b worth of jobs to be executed for FY16. Including revenue contribution from the Energy segment (approximately RM2b per year) and excluding joint-venture project portions, SKPETRO will still need to replenish and execute >RM2b worth of jobs in FY16 to at least match the normalised earnings achieved in FY15.
  • The weak global crude oil price and coupled with Petronas’ capex cut are still the key risks in FY16.
  • Management remains confident to be included in the SC’s May 2015’s Shariah compliant list.
  • I will hold and continue to accumulate SKPETRO.
Latest Financial – Q4 2015 Financial Report (24 Mar 2015)
At the time of writing, I owned shares of SKPETRO.

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