Including this contract, we estimate that SapuraKencana has secured RM2.9 billion (including the RM1.3 billion extension of the Pan-Malaysian contract to install pipelines and facilities) worth of new contracts year-to-date. This is within our new order assumptions of RM5 billion for FY13F.
We estimate that SapuraKencana’s order book has risen slightly by 2% to RM15.7billion — still the largest in the country vis-a-vis Bumi Armada Bhd’s RM10 billion.
Accounting for 2.5 times SapuraKencana’s forecast calendar year 2012 merged revenues, earnings for the next two years are already locked in.
For the rest of the year, we expect fresh contracts to materialise — two wellhead platforms from the Bunga Dahlia and Teratai fields in Blocks 301 and 302, a central processing platform and multiple wellhead platforms from the North Malay gas basin cluster development.
We continue to be positive on SapuraKencana as its estimated tender book of RM10 billion will continue to drive the group’s earnings momentum, underpinned by asset expansion from the delivery of two deepwater-capable construction vessels with DP 3 capability in late 2013 to early 2014, together with three flexible pipe lay Petrobras vessels, one tender rig and a semi-tender rig at end-2014.
SapuraKencana is our preferred stock for oil and gas fabrication providers, given its strong execution capabilities, huge order book and consistent earnings delivery.
SapuraKencana’s valuations are compelling at a FY14F PER of 17 times compared with SapuraCrest’s peak of 29 times back in 2007.