KUALA LUMPUR: Oil and gas firm SapuraKencana’s nine-month ended Oct 31, 2015 operating cash flow more than tripled to RM2.2bil from the six-month period.
This was largely due to more efficient working capital management. In addition, there were no net drawdowns on its credit line as of the nine-month period.
The company’s third quarterly earnings fell 62.7% year-on-year to RM129.9mil. However, the decline was largely due to a RM317.3mil provision made on its oilfields.
Excluding the cumulative impairments of RM857.2mil on its oilfields as well as other provisions and cumulative net foreign exchange gain of RM232.7mil, SapuraKencana’s normalised cumulative nine-month earnings rose by 3.7% year-on-year to RM1.066bil.
“SapuraKencana’s nine-month normalised earnings exceeded our nine-month expectation by a variance of approximately +4% and even surpassed the consensus full year earnings,” said MIDF Research in a note on Wednesday.
Engineering & Construction segment revenue and operating profit rose by 13.4% year-on-year and 15.8% year-on-year to RM4.57bil and RM871.9mil respectively, due to newly executed international projects along with higher activity levels locally.
The company’s drilling segment posted revenue rising by 15.9% year-on-year to RM2.2bil while PBT rose by 1.8% to RM472.8mil.
The energy segment revenue declined by 26.9% year-on-year to RM1.27bil attributable to lower average realised price per barrel and also lower barrels of oil lifted. For the nine-months, a total of 3.7mbbls were lifted and the company is targeting a total of 4.5mbbls for 2016.
In 3Q16, the average realised price was US$48pb while its nine-month realised price was US$57pb. These prices are on par with the trading Brent crude price during those periods, said MIDF.
SapuraKencana’s current orderbook as at Oct 31 stood at approximately RM21bil.
“Previously, we were expecting at least RM8bil to be realised in 2016 but the company has outperformed our expectation by realising close to RM8bil in the nine-months. The steep increase in revenue was a result of both stronger USD/MYR rate along with higher activity levels,” it said.
MIDF maintains its Buy call on the stock with an unchanged target price of RM2.89 per share, premised on PER17 of 13x.
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