Mapping the sustainability landscape

KUCHING: The ways of doing business has evolved with time. Long gone are the days of operating a business purely for the want of generating profits; these days, it is  crucial to consider of the impact our businesses have on our enviroment, society and economy as a whole. In the midst of doing business, sustainability […]

Sumatec sees Rakushechnoye oil output to reach 1,500 barrel a day by end of March


KUALA LUMPUR: Sumatec Resources Bhd said it was informed by its partner CaspiOilGas LLP (COG) that oil production at the Rakushechnoye oilfield in Kazakhstan will reach 1,500 barrels of oil a day (bbl/d) by end of March.

Sumatec Resources’ shares price unchanged with increased output expectation from Kazakh oilfield

PETALING JAYA: Sumatec Resources Bhd’s share price were flat this morning after it said CaspiOilGas LLP’s (COG) oil production in Kazakhstan's Rakushechnoye oilfield could reach 1,500 barrels per day (bbl/d) by the end of March 2018 after having reactivated its oil production enhancement program.

As at 10.04am, Sumatec is the third top active counter on Bursa Malaysia Securities Bhd. Sumatec’s share price stood at 7 sen with 73.93 million shares changing hands.

Sumatec was informed by COG’s general director Saubay Izbassarov in a written field report, informing it of the reactivation of the oil production enhancement program in the second half of 2017.

In addition to that, another 1000bbl/d is expected following the completion of workovers for 12 wells, slated to complete by the end of August 2018.

Sumatec expects increased output from Kazakh oilfield

PETALING JAYA: Sumatec Resources Bhd said CaspiOilGas LLP’s (COG) oil production in Kazakhstan’s Rakushechnoye oilfield could reach 1,500 barrels per day (bbl/d) by the end of March 2018 after having reactivated its oil production enhancement programme.

The group told Bursa Malaysia that it was informed by COG’s director-general Saubay Izbassarov in a written field report, informing them of the reactivation in the second half of 2017. In addition to that, another 1,000 bbl/d is expected following the completion of workover for 12 wells, slated for completion by the end of August 2018.

In line with that, total oil production is expected to further increase to about 7,500 bbl/d with the drilling of two new deep Triassic wells by the end of 2018.

COG is a unit of Markmore Energy (Labuan) Ltd and is the concession owner of the Rakushechnoye oil and gas field in West Kazakhstan. Last October Sumatec had entered into a heads of agreement relating to the acquisition of 100% equity interest in Markmore for RM1.55 billion.

“Under the joint investment agreement (JIA) between Sumatec and COG and the field development plan, Sumatec also has claim on associated gas by way of sharing condensates,” Sumatec noted.

Kenanga Research starts coverage of Sime Darby Plantation with ‘market perform’

PETALING JAYA: Kenanga Research has initiated coverage on Sime Darby Plantation Bhd with a “market perform” recommendation at a target price of RM5.50, on the account of the plantation giant’s market leadership position, emphasis on sustainable palm oil production, fresh fruit bunch (FFB) production recovery, research and development efforts and integrated operations.

The research house gave a 5% premium to Sime Darby Plantation’s forward price-to-earnings ratio (PER) at 26 times against the 25 times of average valuation given to its integrated peers, namely IOI Corp and Kuala Lumpur Kepong Bhd.

However, Kenanga Research said Sime Darby Plantation's high net gearing of 0.56 times may preclude mergers and acquisitions (M&As) and previous production setbacks have pushed up unit production cost.

With it being the largest plantation company (by planted area) and among top three in the world for milling capacity, FFB production and refining capacity as well as producing 4% of global palm oil production of which 98% is certified sustainable palm oil (CSPO), the research house said this affords the group a pricing premium of an estimated US$20/metric ton (MT) or more depending on oil grade.

In FY16-17, severe droughts had resulted in production being flat, which also led to slow earnings recovery and high production cost/MT.

However, going forward, yields are expected to improve in line with the industry of 8% for higher FY18-19 FFB production of 4%-7%.

Kenanga Research also highlighted that as an integrated planter with both upstream plantations and downstream manufacturing, Sime Darby Plantation’s earnings are less affected by crude palm oil (CPO) price movements as lower CPO prices lead to lower downstream feedstock cost, despite its CPO prices are expected to soften by 6%-10% to RM2,417-RM2,569 given sector wide production recovery.

Meanwhile, the research house said the group's “Mission 25:25” aim of producing FFB at 25MT/hectare and 25% oil extraction rate target by year 2025, is within reach with long-term productivity outlook looking positive, implying a compound annual growth rate (CAGR) of 6% per year based on its CPO production estimates.

“Our projections indicate the targets should be achievable, with estimated FFB yield of 24.6MT/ha and OER (oil extraction rate) of 24.8% by 2025 through the use of high-yield planting material and technological improvements.”

On dividend policy, Kenanga Research said Sime Darby Plantation's strong cash flow of between RM1.65 billion and RM1.7 billion for FY18-19 “should easily support” the management’s minimum dividend policy of 50%.

“Based on historical payout ratio (ex-FY17 which saw a large one-off land transaction boosting net profit) of 66%, we anticipate FY18-19E payout ratio at 65% for DPS (dividend per share) of 13.0-14.0 sen/share, which translates to a decent dividend yield of 2.4-2.6% (vs sector average of 2.6%).”

Sime Darby Plantation's share price gained 52 sen or 9.5% to close at RM6 last Friday on some 18.3 million shares done.

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