KENANGA RESEARCH Results Note

30 September 2010

BUY
RM 2.36 SapuraCrest Petroleum
Target Price: RM3.09 1HFY11 results within expectation
Stock data
Market cap (RMm): 3,013.1 l 1H11 net profit of RM 103.9m achieved about 47% of our full year
Issued shares (m): 1,276.7 forecast (RM219.4m ) and that of consensus (RM217.6m ). This came on
52-week range: RM1.86-RM2.58 the back of marginal increase in 2Q earnings at RM53.2m (+5.0%) while
3-mth avg daily volume: 1,176,476 shrs 6MYTD registered an increased of c.33% with strong performance from JV
Bloomberg code: SCRES MK earnings and lower marine losses. First interim dividend of 3.0 sen was
YTD price chg: -4.8% declared in the current quarter.
YTD KLCI chg: +14.8%
l QoQ, 2Q11 pre-tax profit rose 14.3% with drilling division and JV earnings
Est. free float: 27.8% being the main drivers coming in at RM99.7m (+30.6%) and RM13.3
Major shareholders:
(+17.5%) respectively. This is essentially due to effect of higher charter
Sapura Technology: 40.1%
Seadrill Ltd:: 23.6%
rates for T9 and Teknik Barat in a seasonally stronger 2Q while Gumusut-
EPF: 8.5% Kakap project provided better margins as it moves into installation works.

Consensus
FYE 31 Jan
Net profit (RMm):
EPS (sen):
Forecast revision
FYE 31 Jan
Prev. net profit (RMm):
Revision (%):
Revised net profit (RMm):
Share price chart
The Research Team
research@kenanga.com.my
Tel: 603-2713 2292
l YoY, pre-tax profit gained a marginal 4.6% as strong contribution from
2Q11 JV earnings (>100%) was dampened by losses from marine division
2011E 2012E
together with lower earnings from the O&M. In addition, IPF’s contribution
217.6 247.5
was flat as the Petronas Umbrella project only started in 2QCY10.
17.0 19.3
l Good times ahead. Recent renewal of drilling contracts for T6 and T10 rigs
signals the good times ahead especially with Devil Creek Project (Australia)
2011E 2012E and Mumbai High North Field project scheduled for commencement in late
219.4 234.9 2010. These two projects will see the service of newly received pipe laying
- - barges (LTS3000 and QP2000). Order book remains at RM8.1b (TLO:
219.4 234.9
RM4.7b/ JV: RM1.9b (50% of RM3.7b)/Drilling: RM0.7b/ Marine Services
RM0.8b) will last them at least 2 years based on their burn rate of RM3.5b
per annum. Tender book is RM3b and increasing.
l Maintain BUY at TP RM3.09 using FY11F EPS 17.2sen on18x PER. We
remain positive on the stock given their locked-in prospects and also their
strong position for the upcoming domestic developments in deepwater fields
and the Enhanced Oil Recovery (EOR) project. Its recent 49% JV tie up with
Qatar’s Al-Rayan Investment (ARI) will open new opportunities in the Middle
East while adding to their regional expansion plan.

Results Highlights
FYE: 31 Jan (RMm) 2Q10 3Q10 4Q10 1Q11 2Q11 QoQ Chg YoY Chg 6M11 6M10 % Chg
Revenue 1,031.6 1,024.8 484.7 670.4 898.1 34.0% -12.9% 1,568.5 1,747.8 -10.3%
Operating Profits 118.0 111.5 56.3 95.9 107.2 11.8% -9.1% 203.1 194.7 4.3%
Pretax profit 107.9 115.5 72.9 98.7 112.8 14.3% 4.6% 211.5 176.0 20.2%
Taxation (14.3) (16.6) 7.3 (11.4) (13.7) 19.9% -4.2% (25.2) (21.9) 14.9%
Minority Interest (41.0) (45.5) (41.4) (36.5) (45.8) 25.5% 11.3% (82.4) (76.1) 8.3%
Net profit 52.4 53.4 38.8 50.7 53.2 5.0% 1.7% 103.9 78.0 33.2%
Basic EPS (sen) 4.1 4.2 3.1 4.0 4.2 5.0% 1.7% 8.2 6.1 33.2%
DPS (sen) 3.0 0.0 4.0 0.0 3.0 300.0% 0.0% 3.0 3.0 0.0%
Net debt/(cash) (x) (0.1) 0.1 (0.2) (0.0) (0.1) 481.8% 92.2% (0.1) 0.2 -164.8%

Operating margin (%) 11.4% 10.9% 11.6% 14.3% 11.9% -2.4% 0.5% 12.9% 11.1% 16.2%
Pretax margin (%) 10.5% 11.3% 15.0% 14.7% 12.6% -2.2% 2.1% 13.5% 10.1% 33.9%
Net margin (%) 5.1% 5.2% 8.0% 7.6% 5.9% -1.6% 0.9% 6.6% 4.5% 48.4%
Effective tax rate (%) 13.3% 14.4% -10.1% 11.6% 12.2% 0.6% -1.1% 11.9% 12.4% -4.4%

PP7004/02/2011(029201)
Results Review
FYE: 31 Jan (RMm) 2Q10 3Q10 4Q10 1Q11 2Q11 %QoQ %YoY Comment
Segment revenue:
Installation of Pipelines and 614.9 624.9 178.7 355.6
Facilities 546.4 53.6% -11.1%
Drilling 218.2 196.8 187.1 194.8 219.8 12.8% 0.7% QoQ, PBT up due to higher
Marine Services 181.6 193.7 103.6 111.9 119.3 6.6% -34.3% drilling charter rates and
strong contribution from JV
Operations and Maintenance 16.9 9.5 15.3 8.0 earnings.
(O&M) 12.6 57.1% -25.4%
Group Revenue 1,031.6 1,024.8 484.7 670.4 898.1 34.0% -12.9%
Segment EBIT:
Installation of Pipelines and
35.3 57.5 53.6 46.0
Facilities 37.3 -19.0% 5.5%
Drilling 87.7 94.5 83.5 76.3 99.7 30.6% 13.6%
QoQ, PBT dampened by
Marine Services 0.5 (20.8) (43.7) (8.1) (4.4) 45.7% >-100% lower contribution from O&M
Operations and Maintenance 3.3 0.5 3.4 1.0 1.3 37.7% -59.5% and also losses by Marine
Others (18.9) (16.3) (23.9) (16.5) (21.0) division.
Group Operating Profit 107.9 115.5 72.9 98.7 112.8

IPF margin (%) 5.7% 9.2% 30.0% 12.9% 6.8% -6.1% 1.1%
Drilling margin (%) 40.2% 48.0% 44.6% 39.2% 45.3% 6.2% 5.1% QoQ, lower margins from IPF
Marine margin (%) 0.3% -10.7% -42.2% -7.3% -3.7% 3.6% -4.0% due to PCSB at its tail end.
O&M margin (%) 19.2% 5.7% 22.2% 11.9% 10.4% -1.5% -8.8%

Earnings Estimates
FYE 31 Jan (RMm) 2008 2009 2010 2011F 2012F
Revenue 2,261.9 3,451.7 3,257.3 3,460.0 3,740.0
EBIT 264.5 384.4 362.5 456.0 498.9
Pretax profit 171.4 281.6 364.4 438.0 480.9
Net profit 78.3 115.8 170.2 219.4 234.9
Net profit growth (%) -542.4% 47.9% 47.0% 28.9% 7.0%
Basic EPS 6.6 9.7 13.3 17.2 18.4
EPS growth (%) -542.4% 47.9% 37.5% 28.9% 7.0%
DPS 1.9 4.7 7.0 7.0 7.0
Div Yield (%) 0.8% 2.1% 3.1% 3.1% 3.1%
PER (x) 34.0 23.0 16.7 13.0 12.1
NTA/share (RM) 0.8 1.0 1.0 1.1 1.2
Net (debt)/cash (x) (0.7) (0.4) 0.2 0.2 0.2
EV/EBITDA (x) 9.8 6.4 6.0 4.8 4.3
ROAE (%) 9.1% 9.7% 12.2% 14.4% 14.1%

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SapuraCrest Petroleum – 30 September 2010 Page 2 of 2