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KUALA LUMPUR (April 30): PublicInvest Research has downgraded Sapura Energy Bhd’s rating to “Underperforming” to 8-sen and lowered its target price (TP) to 6-sen (from 12-sen) and said results for the year Sapura Energy’s fiscal office did not meet the house’s expectations and consensus, expanding its core losses to RM865.6 million.
In a note today, the research house said this happened after the company reported a central loss of RM508.6 million in 4QFY20, with deficiencies of RM3.3 billion and additional provisions of RM439 million removed.
PublicInvest said significant declines were seen in its engineering and construction (E&C) earnings despite reporting a 50.4% year-over-year increase in revenue.
He said that with the growing imbalances in demand and supply due to the economic downturn as a result of Covid-19, Sapura Energy’s earnings are unlikely to change anytime soon given the very challenging operating climate.
“The main headwinds will come from project deferral based on customer requests, resulting in a top line contraction of around 15% in fiscal year 21, while profit margins for E&C and drilling will be affected due to less utilization.
“We anticipate that Sapura Energy’s earnings for the 21-23 fiscal year will remain in negative territory due to the expected prolonged recovery in the industry.
“We downgraded our rating to Underperform in SapE to an adjusted TP of 6 sen (from 12 sen previously) based on SOP valuations for fiscal 21,” he said.
