SapuraCrest Petroleum Bhd (Jan 13, RM4.60)
Maintain buy at RM4.58 with target price of RM5.60: SapuraCrest Petroleum Bhd’s rapid expansion of its marine fleet to capitalise on the boom in the installation of pipelines and facilities (IPF) is positive, in keeping with its aspiration to be a regional player. This strategy will be rewarding, if it is executed well. However, contributions will only be realised from FY15. We remain positive on its strong ability to grow and pursue new jobs for medium-term growth, and continue to rate SapCrest a “buy”.
SapCrest has placed orders for two 550-tonne pipelay support vessels. These newbuilds, to be built at the IHC Offshore and Marine BV yard, are scheduled for delivery by May 30, 2014 (30-month delivery) and Aug 29, 2014 (33-month). The values for these orders were not disclosed but we estimate that based on current market rates, they would cost about US$350 million (RM1.09 billion) each. SapCrest will pay 20% of the contract price within 25 days of the contract signing, and the remaining 80% upon delivery.
Considering the huge capital outlay, we reckon SapCrest will likely co-own these vessels with its existing partners (Subsea 7, Acergy), on equal equity stakes. These vessels will be deployed for installation and pipeline facilities (IPF) works in Brazil. We think one of the vessels will be chartered for Petroleo Brasileiro’s fields.
These vessels could contribute about US$10 million per year to earnings from FY15, based on a 50% ownership stake. Overall, SapCrest’s regional aspirations are shaping up; it aims for overseas operations to contribute about 30% to revenue over the next three years (from <10% now), before the merger with Kencana Petroleum Bhd.
The proposed merger between SapCrest and Kencana (Newco), pending regulatory and court approvals, is on track and is expected to be concluded by March or April this year.
Based on the offer share swap ratio of 1.96 Newco shares plus 68.54 sen cash for every SapCrest share held, we derive a target price of RM5.60 for SapCrest. We value Newco at RM2.50 (20 times 2013 earnings per share). — Maybank IB Research, Jan 13
This article appeared in The Edge Financial Daily, January 16, 2012.
Maintain buy at RM4.58 with target price of RM5.60: SapuraCrest Petroleum Bhd’s rapid expansion of its marine fleet to capitalise on the boom in the installation of pipelines and facilities (IPF) is positive, in keeping with its aspiration to be a regional player. This strategy will be rewarding, if it is executed well. However, contributions will only be realised from FY15. We remain positive on its strong ability to grow and pursue new jobs for medium-term growth, and continue to rate SapCrest a “buy”.
SapCrest has placed orders for two 550-tonne pipelay support vessels. These newbuilds, to be built at the IHC Offshore and Marine BV yard, are scheduled for delivery by May 30, 2014 (30-month delivery) and Aug 29, 2014 (33-month). The values for these orders were not disclosed but we estimate that based on current market rates, they would cost about US$350 million (RM1.09 billion) each. SapCrest will pay 20% of the contract price within 25 days of the contract signing, and the remaining 80% upon delivery.
Considering the huge capital outlay, we reckon SapCrest will likely co-own these vessels with its existing partners (Subsea 7, Acergy), on equal equity stakes. These vessels will be deployed for installation and pipeline facilities (IPF) works in Brazil. We think one of the vessels will be chartered for Petroleo Brasileiro’s fields.
These vessels could contribute about US$10 million per year to earnings from FY15, based on a 50% ownership stake. Overall, SapCrest’s regional aspirations are shaping up; it aims for overseas operations to contribute about 30% to revenue over the next three years (from <10% now), before the merger with Kencana Petroleum Bhd.
The proposed merger between SapCrest and Kencana (Newco), pending regulatory and court approvals, is on track and is expected to be concluded by March or April this year.
Based on the offer share swap ratio of 1.96 Newco shares plus 68.54 sen cash for every SapCrest share held, we derive a target price of RM5.60 for SapCrest. We value Newco at RM2.50 (20 times 2013 earnings per share). — Maybank IB Research, Jan 13
This article appeared in The Edge Financial Daily, January 16, 2012.
