WHAT could be worse for Sapura Energy Bhd with Kenanga Research ascribing the below assessment on the global integrated oil & gas (O&G) outfit following yet another round of gargantuan loss in its financial year ended Jan 31, 2022:
“Following the massive write-down of the group’s book value, its recurring losses, unprecedented liquidity crunch and with its overall financials currently in dire straits, we have ascribed a floor target price of 0.5 sen (lowered from 4 sen previously pegged to 0.1 times price-to-book value [PBV]) – implying FY1/2022A PBV of 0.3 times.”
More broadly, the research house said Sapura Energy’s FY1/2022 core loss of RM3.3 bil (arrived after stripping-off impairments and net forex, among other non-core items) missed expectations against its/consensus loss estimates of RM2.5bil/RM1.9 bil.
“The hugely disappointing losses were mainly due to the lower project completion coupled with higher project costs for its engineering and commissioning (E&C), and operations and maintenance (O&M) segments,” analyst Steven Chan pointed out in a results review.
“Overall, a huge portion of the group’s core losses were from legacy contracts, whereby execution challenges, project delays, liquidity crunches and unfavourable contract terms with disproportionate risks have resulted in the recurring widening losses.”
With liquidity concerns further hampering its turnaround efforts while limiting its growth prospect, PublicInvest Research has downgraded its call on Sapura Energy to “trading sell” with a lower revised sum-of-parts target price of 3 sen (from 5 sen previously) given heightened uncertainties on its financial standing.
“The group is in the midst of negotiating with its vendors on outstanding payments and lenders through existing or new facilities and under the scheme of arrangement (SOA),” observed analyst Nurzulaikha Azali.
“Meanwhile, renegotiation of legacy contracts, asset monetisation discussion is also on-going. Additionally, we are troubled at the deficiency in its share capital and its viability as a going concern which could see it classified as an affected issuer in due course.”
Elsewhere, JF Apex is ceasing its coverage on Sapura Energy given its challenging earnings outlook, tightened liquidity and high debt level.
At 10.09am, Sapura Energy was unchanged at 4 sen with 22.08 million shares traded, thus valuing the company at RM639 mil. – March 21, 2022
