KUALA LUMPUR: SapuraKencana Petroleum Bhd’s valuations are now attractive with the recent selldown of its shares, said DBS Group Research.
“With the recent selldown, SapuraKencana’s valuations are attractive at 14 times financial year 2015 and 13 times financial year 2016, as the stock has been trading comfortably past 20 times price earnings (PE) previously.”
DBS Research also said at the current price, most of the value accretion from the group’s Newfield acquisition has been wiped out, which is unjustified as it has been producing assets, with potential for more via new gas discoveries.
“Based on our view that weaker crude prices are here to stay, we are lowering our PE valuation target to 20 times from 22 times previously,” it said in a report yesterday.
DBS Research has maintained its “buy” call on SapuraKencana, with a slightly lower target price of RM5.40.
The firm, however, has trimmed SapuraKencana’s earnings forecast for financial years 2015 to 2017 (FY15-17) on the back of lower crude oil price assumptions.
“Following our downgrade of Brent crude oil price assumption to US$95 per barrel from US$106 per barrel previously, SapuraKencana’s FY15-17 forecast earnings are trimmed by only four to five per cent. The group’s earnings are largely insulated from the recent weakness in crude oil prices.”
The firm said SapuraKencana’s earnings are largely intact as these are backed by its solid order book, largely made up of long-term contracts, including pipe lay support vessel charters from Petrobras.