Posted by Philip ( Write To Me If You Need Help) > 2020-03-25 14:41 | Report Abuse

Also, your concept that if the government has a large holdings in the company it will ALWAYS step in to help it out can be a very dangerous assumption if things go bad.

https://www.malaysia-today.net/2015/09/22/the-perwaja-steel-scandal/

You have to look at Sapura in totality and understand it as a business. How are its revenues structured? Where is it coming from? what are its dead weight assets (the OSVs) How efficient are its FPSO? What are the margins are they getting from their O&M, drilling and exploration profits? And most importantly, is it enough to pay their loans and debt obligations and give a profit to investors at these prices?

To simplify, you cannot look at revenue and orderbook alone to judget the quality of Sapura. Since you are in O&G business, I am sure you have been to easier to navigate locations and high risk areas? I have heard horror stories from old classmates who worked in North sea, so when you want to study sapura you need to understand a few core concepts:

1. Cost of oil extraction and production (russia is USD 30, Saudi is USD 5. Sapura so far seems to be in the region of USD50)
2. Efficiency of equipment and team (return on capital employed)
3. Profit margins and Net margin

For sapura, their quarterly revenue has remained steady around the 1.7b range quarterly. Out of this:

1. Their operating expenses were 1.69 b (very very high ratio compared to revenue)
2. Out of this, their finance cost is 150 million every quarter (meaning they have to pay 600 million in interest and debt reduction every year), not to mention taxes.
3. They have already sold many assets and profitable businesses (https://www.thestar.com.my/business/business-news/2018/11/30/sapura-to-sell-stake-in-drilling-division). Meaning they will not be growing, but are in serious cost cutting measure. When oil war is going on, how will they sell their under utilized assets?
4. How long can their cash in hand last before they need another influx either from private placements, sales of businesses and assets at force sell prices, or more debt increases?
5.Continuing operations:
Revenue Operating profits
E&C 1,592,166 16,089
Drilling 185,860 (48,151)
E&P - sold 14,277

In a nutshell, their operating profits from engineering and construction is 1%!! and their drilling will always be a negative amount. And since they already sold their profitable exploration and production to OMV ( which was supposed to be the big help), you have a company that is only hoping to survive by selling assets to people who do not want them (thus selling at cheap prices), while trying to get whatever contracts at hand just to keep going (instead of doing profitable contracts at good prices).

I think understanding the business directly, will give you a deeper outlook to the company's future, instead of just betting on the accounting land figures which can be massaged anyway you like.

Real World Numbers never lie.

Posted by qqq33333333 > 2020-03-25 14:44 | Report Abuse

tough lah..............brent at less than US$ 30 sure tough..............

Posted by Philip ( Write To Me If You Need Help) > 2020-03-26 12:02 | Report Abuse

that is why i like companies like serba and yinson, no relation to price of oil but a fixed multiyear contract for serevices rendered at manday labour.