- We maintain our BUY call on SapuraKencana Petroleum (SapuraKencana) but with a lower fair value of RM3.20/share (from RM4.80/share previously), based on a lower FY16F PE of 12x (vs. 18x previously).

- The group announced that it has secured contracts and contract extensions worth ~RM1.6bil (US$459mil). The contract details are as follow:-

i) Three contracts worth RM710mil (US$206mil) under the Fabrication, Hook-up and Commissioning Division which include:- (1) a RM480mil contract for engineering, procurement, construction and commissioning (EPCC) of the Baronia and Tukau wellhead platforms; and (2) a RM140mil contract for the procurement, construction and commissioning of the Angsi compression module.

ii) Three contracts worth RM520mil (US$151mil) under the Offshore Construction and Subsea Services Division, which includes a US$120-US$130mil contract from Total E&P Myanmar for the engineering, procurement, construction and installation of the Wellhead Platform 4 and lower compression platform, pipelines and cable for the Yadana Field, Offshore Myanmar.

iii) Two contracts worth RM350mil (US$102mil) under the Drilling Division for the provision of a SemiTender Assist Rig for a development drilling campaign offshore Ivory Coast and an extension of an existing contract for the development drilling campaign offshore Equatorial Guinea.

- These contracts have raised the group’s new order secured to date this year by 24% to RM8.1bil. 63% of these new orders secured this year stem from tender rig charters.

- We maintain our forecasts for now as these contracts are within our current estimates. We have currently assumed RM9bil-RM12bil in new order assumptions annually for FY15F-FY17F. However, we highlight some risks to our estimates given the challenging outlook of the industry, amid the lower crude oil price environment and oil companies cutting capex.

- The group’s outstanding order book now stands at ~RM28bil (2.4x of FY16F revenue) and remains the largest within the O&G sector – above Bumi Armada’s firm orders of RM22bil.

- The stock currently trades at a FY16F PE of 9x currently.

Source: AmeSecurities