Sapura Energy active, recovers from selldown to climb 2.41%
Date: 11.12.2017.

Publication Source: The Edge Markets 

After the latest drop in stocks in the past two trading days, Sapura Energy Bhd recovered today on positive sentiment from analysts covering the counter despite announcing weaker earnings in its latest quarterly results.

On Dec 7, the group announced it had slipped into the red after posting an after-tax loss of RM274.41 million in the third quarter ended Oct 31, 2017 (3QFY18) against a net profit of RM158.06 million a year ago, while revenue dipped 42% year-on-year to RM1.28 billion from RM2.22 billion.

As for the cumulative first nine months of FY18 (9MFY18), Sapura Energy booked in a net loss amounting to RM217.95 million versus a net profit of RM380.64 million last year, while revenue declined 19% to RM4.71 billion from RM5.84 billion.

Consequently, the group witnessed its share price tumbling from RM1.18 earlier in the day and closing below the RM1 mark on Dec 8 at 83 sen.

However, at the midday break today, Sapura Energy rose 2.41% or 2 sen to 85 sen with 38.41 million shares done.

Last Friday (Dec 8), CIMB Research upgraded its recommendation on Sapura Energy from 'hold' to 'add' as long-term value began arising from the sharp sell-down the day earlier.

"We have forecast E&C (engineering and construction) revenue of RM4 billion for FY19F. Although a weak 1HFY19F is very likely, Sapura Energy may secure new offshore vessel and fabrication work that may help it do better in 2HFY19F," CIMB Research said in its note.

"In other words, the next six to nine months may be challenging for the E&C division, but Sapura Energy appears more optimistic for 2HFY19F," it noted.

Additionally, the research firm said it expects Sapura Energy to record higher utilisation rate of its rigs moving forward, aided by new contract wins, which could boost the rate to up to 40% in FY19 from the current 33%.

"Only five of Sapura Energy's 15 rigs were employed in 3QFY18, and we expect the 33% utilisation rate to remain stable in 4QFY18F, leading to an estimated 36% utilisation rate for FY18F. For FY19F, utilisation is expected to remain flat at 35% but we have assumed that new contract wins will help raise the full-year FY19F utilisation to 40%," CIMB Research said.

"Sapura Energy noted that there is indicative client interest to employ more of its rigs, commencing from 3QFY19F onwards."

Meanwhile, the SK310 B15 offshore field will see the first gas in 4QFY18, and more ensuing significant contributions FY19 onwards, PublicInvest Research said in its note dated Dec 8, further noting that Sapura Energy is also progressing with monetisation of SK408 (Gorek and Larak) and planning for a 2+1 exploration commitment wells to be drilled in 4QFY18.

"The group currently makes sufficient money from its operations to service debt repayments in addition to paying taxes, though it is of no great comfort to shareholders as there isn't much left for dividend payments," the research house added.