SapuraKencana Petroleum; Buy; RM2.47
Price target: RM2.70; SAKP MK

SapuraKencana announced that it has been awarded a hook-up commissioning (HUC) contract worth RM50m for the Montara Development project from PTTEP Australasia (Ashmore Cartier) Pty Ltd. The contract duration is 3 months, commencing in Oct12.

Its subsea support vessel, Normand Clough, will be used for the HUC services at the Montara field which is located 700km west of Darwin in the Timor Sea, off the coast of Northern Australia. To recap, SapuraKencana first secured the Montara’s US$160m transport & installation contract (using Sapura3000) back in Nov10. We believe that this HUC contract underlies its competitive advantage of integrated services across the value chain which will ultimately make SapuraKencana the preferred O&G offshore service provider.

We estimate its outstanding order book at RM14bn, which has largely secured its earnings for the next 2-3 years. We remain positive on SapuraKencana as we believe that it is the largest beneficiary of Petronas record high capex of RM300bn over the next few years. It is currently the cheapest large cap O&G stock in Malaysia, trading at 16x CY13 PE (vs peers’ 22x). Reiterate our Buy call with RM2.70 TP.

Source: HwangDBS Research - 3 August 2012