$SAPNRG / 5218 (SAPURA ENERGY BERHAD) SAPURA ENERGY
Research by Public Bank
OUTPERFORM ; Target Price RM0.39 ; Upside +36.8%

"Slow Recovery"
Stripping off some exceptional items amounting to RM3.7m, Sapura Energy (SapE) reported 2QFY20 core net loss of RM112.6m from a loss of RM163.1m in 2QFY19. For cumulative 1HFY20, core net loss widened to RM237.1m though better than its 1HFY19 core net loss of RM309.5m, this coming despite lesser contribution from its profitable business i.e. exploration and production, after the disposal of a 50% stake to OMV. Nevertheless, the results are still below our and consensus full-year estimates, with most anticipating break-even this year. Considering the protracted delays in its recovery, we cut FY20 earnings to a net loss of RM141.1m while FY21 sees a lowered profit of RM51.7m, accounting for lower asset utilization rates. We do see favorable profit margins in FY22 however, with higher asset utilization driving earnings, hence our lifting of estimates by 29.3%. Separately, the Group also announced that it has secured multiple contracts in various countries with a combined value of c. RM774m. We are positive on this as it will strengthen the Group’s orderbook profile (now at RM16.3bn) and earnings visibility. With earnings expected to improve in 2HFY20 onwards albeit gradually, we reiterate our Outperform rating on SapE at an adjusted TP of RM0.39 (RM0.43 previously).

Nurzulaikha Azali
T 603 2268 3017
F 603 2268 3014
E nurzulaikha.azali@publicinvestbank.com.my