SKPETRO (5218) : SapuraKencana Petroleum - Blue SKEI scenario
Target RM6.84 (Stock Rating: ADD)
The new blocks in Vietnam and Sabah, which come under SapuraKencana Energy Inc (SKEI), were the key focus points at SapuraKencana’s meetings with investors at our London conference. Armed with an RM26.8bn order book, the company is adding upstream acreage to ensure sustainable growth. Meanwhile, management said today that it expects the stock to return to the Securities Commission’s (SC) shariah list in May 2015. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x. Maintain Add with a successful exploration & production (E&P) venture and strong order book momentum as potential re-rating catalysts. SapuraKencana remains our top pick among the oil & gas big caps.
What Happened
On 21 Nov, SapuraKencana’s management team, led by President and Group CEO Tan Sri Shahril Shamsuddin, participated in our 12th Annual Asia Pacific Leaders' Conference in London. Management was upbeat as the company had the day before announced the acquisition of four oil & gas blocks in Vietnam from Petronas for US$400m and the signing of two blocks in Sabah with Petronas (Figure 1), a one-two punch that cements SapuraKencana’s presence in the E&P segment. Separately, management held a conference call today on the company’s initiatives to meet the SC’s requirement for shariah compliance. The stock was removed from the SC’s shariah list today, but management expects it to make the list in the May 2015 review. See overleaf for highlights from the London conference meetings and today’s conference call.
What We Think
We continue to view positively SapuraKencana’s efforts in building a portfolio of upstream assets that will provide sustainable growth. Management is clearly putting in place the building blocks for the company’s future growth as it moves further away from project-based income to annuity-type contributions for up to 27 years, which is the duration of the Sabah production-sharing contract (PSC).
What You Should Do
Take advantage of the share price correction and accumulate the stock as SapuraKencana is operationally strong, offering an order book of RM26.8bn and long-term earnings visibility that are supported by its E&P ventures, two long-term contracts in Brazil, and various multiple-year offshore construction and subsea services (OCSS) and drilling contracts.
Source: CIMB Daybreak - 01 December 2014
Target RM6.84 (Stock Rating: ADD)
The new blocks in Vietnam and Sabah, which come under SapuraKencana Energy Inc (SKEI), were the key focus points at SapuraKencana’s meetings with investors at our London conference. Armed with an RM26.8bn order book, the company is adding upstream acreage to ensure sustainable growth. Meanwhile, management said today that it expects the stock to return to the Securities Commission’s (SC) shariah list in May 2015. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x. Maintain Add with a successful exploration & production (E&P) venture and strong order book momentum as potential re-rating catalysts. SapuraKencana remains our top pick among the oil & gas big caps.
What Happened
On 21 Nov, SapuraKencana’s management team, led by President and Group CEO Tan Sri Shahril Shamsuddin, participated in our 12th Annual Asia Pacific Leaders' Conference in London. Management was upbeat as the company had the day before announced the acquisition of four oil & gas blocks in Vietnam from Petronas for US$400m and the signing of two blocks in Sabah with Petronas (Figure 1), a one-two punch that cements SapuraKencana’s presence in the E&P segment. Separately, management held a conference call today on the company’s initiatives to meet the SC’s requirement for shariah compliance. The stock was removed from the SC’s shariah list today, but management expects it to make the list in the May 2015 review. See overleaf for highlights from the London conference meetings and today’s conference call.
What We Think
We continue to view positively SapuraKencana’s efforts in building a portfolio of upstream assets that will provide sustainable growth. Management is clearly putting in place the building blocks for the company’s future growth as it moves further away from project-based income to annuity-type contributions for up to 27 years, which is the duration of the Sabah production-sharing contract (PSC).
What You Should Do
Take advantage of the share price correction and accumulate the stock as SapuraKencana is operationally strong, offering an order book of RM26.8bn and long-term earnings visibility that are supported by its E&P ventures, two long-term contracts in Brazil, and various multiple-year offshore construction and subsea services (OCSS) and drilling contracts.
Source: CIMB Daybreak - 01 December 2014
