Analysts slash earnings forecasts for Sapura Energy

PETALING JAYA: Research houses have slashed their earnings forecasts for Sapura Energy Bhd with the anticipation of slower engineering and construction (E&C) contribution going forward, despite posting headline net profit in ended Jan 31 (FY19).

Analysts said despite returning to the black, the group’s FY19 results missed expectations as its core net loss of RM945 million came in wider than its FY19 loss projections due to weaker-than-expected E&C and drilling contribution.

In a note today, Hong Leong Investment Bank (HLIB) Research said it has cut its FY20 earnings forecast by 37% to RM78.7 million after accounting for weaker E&C contribution.

PublicInvest Research said although the group is currently in positive transition towards improving its numbers, the research firm believes that the recovery process is likely to be slower-than-expected, hence its earnings forecasts have been trimmed by an average of 67% for FY20-21.

Meanwhile, Kenanga Research said it cut its FY20 earnings by 80% after adjusting finance costs assumptions given Sapura’s borrowings payments schedule, while realigning its E&C order-book recognition and margins assumption.

However, HLIB Research has adjusted upwards its FY21 earnings by 3% to RM303.7 million subsequent to lower depreciation post impairment.

“We believe Sapura should be recording better sequential quarterly results and turnaround in the second half of FY20 due to pick up in E&C contribution, and interest savings after paring down its debt. FY21 growth should be largely coming from SK408 gas field’s maiden contribution,” HLIB Research added.

PublicInvest Research said its target price is subsequently lowered to 43 sen but its “outperform” rating on the group has been retained on the back of its improving outlook.

“We also expect FY22 to be much stronger with net earnings of close RM200 million backed by its solid orderbook in hand of RM17.2 billion and potential win from its active tenderbook of circa RM45.1 billion as well as improved contribution from E&P segment,” it added.

Kenanga Research also maintain its “outperform” rating with a higher target price of 43 sen.

Meanwhile, HLIB Research kept its “buy” call on the stock with higher target price of 43 sen pegged to higher 0.6 times FY20 price-to-book ratio on lower uncertainty to its book value subsequent to its kitchen sinking activities in end-FY19.

Source: The Sun Daily

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