• We are ceasing coverage on Sapura Energy due to a reallocation of internal resources. The group continue to be loss making and we expect it to remain in the red in the next three years. We remain cautious on its engineering & construction (E&C) segment’s profitability. SAPE’s holistic debt and equity restructuring – highly dilutive, in our view – is inevitable for it to get out of the woods.

• Challenging outlook for SAPE as orderbook replenishment remains one of its biggest challenges, with limited access to bank guarantees and working capital. The recent disposal of SapuraOMV is essential to reset the group and strengthen its balance sheet while marking its exit from the exploration & production business. Its external auditor, Ernst & Young, has expressed its unqualified opinion, with material uncertainty as a going concern in respect of its FY24 (Jan) audited financial statement.

• Ceasing coverage. Our most recent recommendation was a SELL with a TP of MYR0.02.

Source: RHB Research - 25 Jun 2024