• Maintain Trading BUY (TP: RM0.06). Sapura Energy turned to net loss again in 2Q25 with LATAMI of RM5mn. This was mainly due to forex loss amounting to RM106mn which arises partly from stronger ringgit affecting its existing multi-currency financing facilities. However, stripping out the unrealised forex loss, 2Q25 core PATAMI was at RM101mn. Overall, 1H25 core PATAMI of RM236mn was above our expectation. We attribute this to (i) gains from reversal of contingency provision, and (ii) stronger JV performance. We are optimistic that the worst is over and thus the company will be able to improve its capital structure to a more sustainable level moving forward. Hence, we maintain our TRADING BUY recommendation on Sapura Energy with TP RM0.06.

• Key highlights. Revenue inched up 3% QoQ and 6% YoY to RM1.2bn mainly buoyed by (i) commencement of Petronas’ Pan Malaysia Underwater Services contract in the O&M segment, and (ii) higher drilling rig utilisation rate. Meanwhile, E&C revenue declined slipped 8% QoQ to RM750mn due to completion of certain projects such as T&I campaign for an LNG project (Congo), brownfield gas development project in Peninsular Malaysia and decommissioning projects in Thailand, New Zealand and Australia. At PBT level, both E&C and O&M segments recorded profit of RM242mn and RM30mn respectively. Meanwhile, drilling segment remain in the red with loss of RM16mn due to higher depreciation and finance costs.

• Earnings forecast. We tweaked our earnings forecast taking into account improvement in 1H25 and stronger JV contribution (table 4).

• Outlook. As at 2QFY25, orderbook for subsidiaries and JV declined by 16% and 14% to RM5.9bn and RM6.1bn respectively as there was no new contract win in the quarter. On its restructuring plan, the scheme is still under development before it will be voted upon by creditors during a court-convened meeting. Note that it has until 30th Nov 2024 to submit the PN17 regularisation plan to regulator.

Source: BIMB Securities Research - 27 Sept 2024