SapuraKencana Petroleum : Fresh 2017 contracts buoys improving sentiments

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SapuraKencana Petroleum : Fresh 2017 contracts buoys improving sentiments                                   BUY

We reiterate our BUY recommendation on SapuraKencana Petroleum with a higher book value-based fair value of RM2.07/share (from an earlier RM1.80/share) by removing the 20% discount on the group’s intangible assets as the risks of further significant impairments have fallen on improved crude oil prices, currently above US$50/barrel, and the new contract wins.

We expect the securing of 5 new contracts which have a combined value of US$300mil (RM1.3bil) to underpin improving sentiments. These awards further brightens the group’s earnings prospects as we estimate that these contracts will add 31% to the group’s new wins to date in FY17F to RM5.5bil – 79% of our FY17F order book addition of RM7bil. The stock currently trades at an unjustified 17% discount to its latest quarterly reported book value.

ECONOMIC HIGHLIGHTS

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NEWS HIGHLIGHTS

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