SapuraKencana scoring big in Brazil

by **Cals** Tue 08 Jul 2014, 08:48

Business & Markets 2014

Written by CIMB Research

Monday, 07 July 2014 11:08

SapuraKencana Petroleum Bhd
(July 4, RM4.37)
Maintain add with target price of RM7: On June 28, 2014, Sapura Navegacao, a 50:50 joint venture between SapuraKencana and Seadrill Ltd, has already started its operations in Brazil. The 550-tonne Sapura Diamante, the first of six pipe laying support vessels (PLSVs) contracted by Brazil’s state-run oil company Petrobras, started work more than three months ahead of its contractual delivery date. The vessel was constructed by IHC Merwede in the Netherlands.

Sapura Navegacao has two contracts with Petrobras. In November 2011, it secured a 5+5 US$1.4 billion contract to charter and operate three PLSVs — a 300-tonne vessel and two 550-tonne vessels, one of which is Sapura Diamante.

The second contract worth US$2.7 billion, awarded in June 2013, was a 8+8 contract call for the charter and operation of three additional 550-tonne PLSVs.

It is heartening that SapuraKencana’s maiden venture in Brazil is going smoothly, with first contributions likely to be reflected in its results for the third quarter ending Oct 31 of financial year 2015.

After Sapura Diamante, we understand that the remaining five PLSVs are also likely to start work ahead of their contractual delivery dates.

Currently, SapuraKencana’s order book is at a record RM30.3 billion. As at June 10, 2014, Brazil was the company’s single biggest market, accounting for 49% of its order book, followed by Malaysia (27%), Australia (5%), Africa (5%), and Southeast Asia and others (14%).

Accumulate the stock as SapuraKencana offers solid order book and earnings visibility, supported by the two long-term contracts in Brazil as well as various drilling and offshore construction and subsea services contracts. — CIMB Research, July 3

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This article first appeared in The Edge Financial Daily, on July 7, 2014.