WHILE the spotlight is shining on Serba Dinamik Holdings Bhd with regard to its financial destiny, its ‘big brother’ in the oil & gas (O&G) realm Sapura Energy Bhd, too, is not exactly having a picnic.
At RM10.3 bil, Sapura Energy’s debt burden is very heavy despite securing a two-and-a-half-year principal repayment moratorium at its March 2021 loan restructuring, according to CGS-CIMB Research.
“Repaying it over seven years may be difficult as upstream capex spending has not yet picked up,” justified analyst Raymond Yap in a results review.
“Asset and business divestments are being planned, but many of Sapura Energy’s offshore vessels and tender drilling rigs have aged and some have been cold-stacked for years, leaving realisable values in question.”
Henceforth, CGS-CIMB Research pointed out that it remains to be seen if Sapura Energy can secure the funds to survive its energy transition and finance its ambition of becoming an owner-operator of offshore wind assets.
“FY1/2022 will continue to be a challenge despite having successfully re-financed its loans. Its high debt (RM10 bil)/net gearing (1 time) levels remain a concern while it needs to address the declining order book and manage costs at the same time,” projected the research house.
The former will delay its energy transition plan which is only likely to take place in two to three years. It needs to hit RM1.5 bil EBITDA (earnings before interest, taxes, depreciation, and amortisation) to match its seven-year repayment period which is untenable by our estimate by FY2024.”
According to CGS-CIMB Research, Sapura Energy incurred a 1Q FY1/2022 core net loss of RM128 mil which was 2.6 times its FY2022F forecast due to RM43 mil net forex loss and RM48 mil capitalised loan fees written off.
All-in-all, CGS-CIMB Research reiterated its “hold” rating on Sapura Energy with a slightly lower sum-of-parts (SOP)-based target price of 14 sen (from 14.5 sen previously).
With this quarter’s bottom-line partially dragged by one-off refinancing expenses, Kenanga Research is hopeful that upcoming quarters could produce better numbers, especially in 2H FY1/2022, backed by recognition of the group’s order-book of RM11.8 bil with RM29 bil worth of bids already submitted globally.
The research house maintained its “outperform” call on Sapura Energy with an unchanged target price of 21 sen.
“Post results, we narrowed our FY2022E/FY2023E losses by 26%/15% after factoring in stronger E&C (engineering & construction) order-book recognition and higher crude oil price assumption for its E&P (exploration & production) segment,” noted analyst Steven Chan.
At the close of today’s morning session, Sapura Energy was down 0.5 sen or 3.85% to 12.5 sen with 62.37 million shares traded, this valuing the company at RM2 bil. – June 30, 2021
