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KUALA LUMPUR (September 24): A corruption investigation into Sapura Energy Bhd’s participation in the award of a US $ 2.7 billion contract with Brazilian state-owned Petrobas amid the group’s weak finances raises concerns about its prospects, which That could further affect its already low share price, he said. AmInvestment Bank.
Sapura Energy and its joint venture partner (JV) Seadrill Ltd have been investigated by the Brazilian and Dutch police as part of a corruption investigation in three contracts worth $ 2.7 billion signed between Sapura Energy and the oil company Petrobras in 2011, Reuters reported yesterday.
According to Reuters, prosecutors outlined an alleged scheme in which Sapura Energy allegedly paid bribes worth 1.5% of the contracts it won with Petrobras, adding that some of that bribery money appeared to have returned to two Sapura Energies from ” high rank”. executives in Malaysia, without providing names.
“This represents an estimated RM166 million [or] 57% of Sapura Energy’s loss in fiscal year 21, ”AmInvestment Bank senior analyst Alex Goh wrote in a note today.
The contracts, which are for the construction and charter of three support vessels for laying pipes, known as PLSV, are still in force. The first letter or contract has been delivered, while the second with a remaining order book of RM3.8 billion is still in the works.
However, while the joint venture partners are expected to adopt the second charter, there is a possibility that substantive sanctions will be imposed if the authorities can prove the corruption cases, Goh noted.
Amid these worrying legal issues, the group’s massive RM10 billion debt has yet to be rolled over with 14 banks by December 2020, which could mean an additional capital raising exercise in progress that will translate into massive dilution given the current low price of the shares, “he said.
Interestingly, there was a quiet response to the group’s share price this morning, as the shares are unchanged at 11 sen. Goh said that given the corruption investigation amid prospects for further losses in the coming quarters, the shares are currently trading at a low of 0.2 times their book value.
Permodalan Nasional Bhd (PNB) has a majority stake in the oil and gas company with a stake of more than 30%, and the group’s Chairman and CEO, Tan Sri Shahril Shamsuddin, is the second largest with a stake of around 13%.
Shahril recently announced that he would be stepping down from the post next year in March 2021, and appointed Datuk Mohd Anuar Taib as his appointed CEO starting next month as part of a six-month transition.
Although Sapura Energy recorded an improvement in the first half of the fiscal year ending January 31, 2021 (1SFY21), Goh remains cautious regarding potential cost provisions and asset impairment for 4QFY21 as Petronas had recorded a loss. RM18 billion in 1SFY20, combined. with other big oil companies.
During the first six months ending July 31, it reported a cumulative net profit of RM37.95 million versus a net loss of RM225.41 million, based on revenue of RM2.58 billion versus RM3.56 thousand. million a year ago.
He noted that the Sapura Energy joint venture contributed an estimated RM123 million (US $ 30 million) pre-tax profit in 1HFY21 versus a group pre-tax profit of RM90 million, which includes contract adjustments and variation orders. for an amount of RM82 million, with the six PLSV. currently in use.
In addition, Goh noted that Sapura Energy’s backlog in 2QFY21 fell 5% on a quarterly basis to RM13.3 billion, noting that recent new earnings of RM840 million were insufficient to offset 2QFY21’s depletion of RM1.2 billion. of ringgit.
“Even though the group is competing for RM 29.4 billion in new jobs with additional prospective projects worth RM 63 billion, the order book could still decline over the next two quarters as it is likely that clients postpone awards until next year if the current outlook persists, ”he said.
In terms of its cash flow, AmInvestment Bank estimates that Sapura Energy’s net cash flow will be around 125 million ringgit for fiscal year 21, before rising to 268.5 million dollars in fiscal year 22.
Read also:
Sapura Energy and Seadrill latest firms to be targeted in the ‘Car Wash’ corruption investigation in Brazil
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