Buy SapuraKencana shares: HwangDBS (5218)

SapuraKencana Petroleum Bhd's current RM14.3 billion order book is
expected to provide the integrated oil and gas services and solutions
provider strong earnings visibility over the next three years, a
research house said.

HwangDBS Vickers Research Sdn Bhd, in its
research note, said apart from that, the company will be busy tendering
for Petronas jobs these few months namely in fabrication and marginal
field contracts.

It said the company will have no problem taking
this on, given its enlarged balance sheet and full spectrum of oil and
gas (OandG) services.

The delivery of five new pipelay support vessels by 2014 will also boost its financial year 2016 earnings significantly.

SapuraKencana
currently owns six tender rigs, making it the largest rig operator in
the region, with two more rigs to be completed by 2014.

"We like
the resilient earnings that it derives from long-term drilling and
installation contracts, which make it less susceptible to oil price
volatility," the research house said.

SapuraKencana is the only local player to offer a complete range of assets to undertake all types of OandG services.

Meanwhile,
the research house is cutting the earning forecast for the companys'
financial year 2013 by 21 per cent after stripping out Kencana's
fabrication contribution for January to May 2012 as the merger was
completed in late May 2012.

It said SapuraKencana will only book 8.5 months contribution under the current accounting standards.

"We
are unperturbed by the earnings downgrade because it is only accounting
requirement rather than an operational issue. Therefore, our financial
year 2014 and financial year 2015 projections are intact," it said.

The research house reiterated a 'buy' call with RM2.70 target price, implying 15 per cent upside potential. -- Bernama