Jan 28, 2011

SapuraCrest Petroleum: Buy By AmResearch

Stock name: Sapcres  Stock Code: 8575  Price: RM3.43 Fair Value: RM4.40

We reiterate our BUY call on SapuraCrest Petroleum (SapCrest) with an unchanged fair value of RM4.40/share based on an FY12F PE of 22x. The stock remains our top pick for the oil & gas sector for its attractive valuations, strong order book, reacceleration of order book accretion and improving earnings delivery.

SapuraCrest has secured a fresh RM98mil (US$32mil) contract from Petronas’ PC Myanmar (Hong Kong) Ltd to provide transportation and installation of offshore facilities for Yetagun Phase 4 development in the Andaman Sea offshore Myanmar.  While this project will only add a slight 1% o the group’s outstanding gross order book of RM9bil, we believe that this s just a foretaste of the pipeline of massive new orders given SapCrest’s established capability in securing new jobs domestically and overseas.

We maintain our view that SapCrest is the favourite to secure offshore installation obs from Petronas’ prolific capex rollout, potentially up to RM40bil this year. The stock currently trades at an attractive CY11F PE only 18x vis-à-vis over 20x for Dialog Group, MMHE and Kencana Petroleum.


by: AmResearch