HLG: 27 March 2008 SapuraCrest Petroleum - Full-year FY08 results beat the Street

SapuraCrest Petroleum BUY.



Price target RM1.90



Share price at 26 Mar RM1.12



Investment summary


SapCrest reported full year FY08 net profit of RM78m was 8-12% above HLG/consensus estimate due to an unexpectedly low tax rate. Strong results re-affirm our BUY rating on SapCrest. We remain positive on the company: (1) recent sharp –29% share price declines in oil&gas services provides an attractive entry level into a sector which is still seeing strong job-flow/ASP growth; (2) 11x FY08E PE and 3x P/BV is a 30% and 70% discount to global peers Seadrill/Acergy. We remain positive on O&G asset owners: (1) purpose built heavy lift vessel are enjoying strong charter rates due to the scarce availability of such assets globally (2) record oil prices continue to support demand for drilling rigs as global fleet utilization remains close to 100 percent.



Bargain basement prices

Following the recent sell-down, sector multiples are comparable to the KLCI, but with 2-3x the level of EPS growth. For SapCrest, FY09E EPS could double on its current RM4bn order book, and continued share accumulation by Seadrill provides us a comfort zone.