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Wednesday, December 10, 2014

SapuraKencana top pick among CIMB Research’s O&G stocks

KUALA LUMPUR: CIMB Equities Research said SapuraKencana Petroleum’s (SKPetro) record 9M net profit broadly met its expectations at 78% of its forecast for FY ending Jan 31, 2015 (FY15).
However, it expects a soft fourth quarter due to the monsoon season.
“Still, the nine months net profit surpassed consensus expectation by fulfilling 92% of estimates. The net profit hit RM1bil for the first time, fuelled mostly by contributions from SapuraKencana Energy Inc.'s (SKEI) and Seadrill's assets.
“We continue to value the stock at 21.2 times CY16 P/E, still at a 30% premium over our target market P/E of 16.3 times, pending a review of our premium valuations. We maintain our Add call, with strong order book momentum as a potential re-rating catalyst.
“SapuraKencana remains our top pick among the oil & gas big caps,” it  said on Wednesday.
To recap, CIMB Research said SKPetro’s nine-months net profit surged 74% on-year to hit the RM1bil  mark for the first time.
Contributions from SKEI or formerly Newfield’s oil fields and Seadrill's rigs shored up SKPetro’s 3Q net profit by 42% on-year. This led to a 74% on-year surge in 9M net profit, which is an all-time high.
The fabrication, hook-up and commissioning (FHUC) segment recorded a contraction, but the offshore construction and subsea services (OCSS) and drilling and energy services segments registered growth, with the main contributors being SKEI's and Seadrill's assets that were acquired in Feb 2014 and Apr 2013, respectively.
SKPetro’s  order book is RM26.2bil, including RM1.6bil worth of contracts and contract renewals announced on Dec 5.
“The order book is set to grow as management scouts for more contracts, including one for Teknik Berkat drilling rig, which is idle. Management targets to get the rig contracted by March 2015,” it said.

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