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PublicInvest retains ‘outperform’ outlook on Sapura Energy

Source: New Straits Times

KUALA LUMPUR: Sapura Energy Bhd will have shown a bigger core net loss of RM654.8 million for the year ended January 31 2019, said Public Investment Bank Bhd (PublicInvest).

This was after stripping off some exceptional items including impairment on goodwill and PPE of RM1.5 billion, gain on disposal of its 50 per cent stake in upstream business of RM2.7 billion and RM281 million from other provision and forex, PublicInvest explained.

The RM654.8 million was larger than PublicInvest and consensus’ projection of a loss of RM498.5 million and RM364.7 million, respectively.

Yesterday, the oil and gas giant said it had posted a net profit of RM208 million for the year under review, reversing the net loss of RM2.5 billion, previously.

For the fourth quarter alone, Sapura Energy recorded a net profit of RM500.43 million compared to a net loss of RM2.29 billion, a year ago.

PublicInvest said for the fourth quarter, Sapura Energy had posted a relatively bigger core net loss of RM286.1 million.

The firm said the weak full-year performance was mainly attributed to lower recognition from the engineering and construction (E&C) and drilling segments as a result of higher cost incurred.

Most of Sapura Energy’s E&C projects were still in the initial procurement phase as well as low utilisation of assets, it added.

Operational numbers remained positive nonetheless, PublicInvest said, adding that the company’s earnings before interest, taxation, depreciation and amortisation) of RM877 million and margins stood at 5.9 per cent for the year.

“We reckon the recovery process is likely to be slower-than-expected and hence, we cut our earnings forecasts by an average of 67 per cent for FY20/21.

“Our target price is subsequently lowered to 43 sen but our ‘outperform’ rating on Sapura Energy is retained on the back of its improving outlook,” it said.

Sapura Energy fell 0.5 sen or 1.45 per cent to 34 sen at noon yesterday.

Source: New Straits Times