Sime Darby - RM1b EPCIC job from Petronas? (Maintain Hold, TP: RM9.65)

Sime Darby - RM1b EPCIC job from Petronas? (Maintain Hold, TP: RM9.65)

Over the weekend, it was reported that Sime Darby Engineering is believed to have secured the EPCIC (engineering, procurement, construction, installation, and commissioning) job for the central processing platform topside and jacket for Kumang, F9, Laho and Melor development projects worth RM1bn in total from Petronas Carigali. (Source: The Edge weekly)

Comments:
Limited yard space. With limited yard space, our O&G analyst thinks it is highly unlikely that Sime Darby Engineering will be awarded this RM1bn contract by Petronas Carigali Sdn Bhd.
Small impact, if any. Under a best case scenario whereby Sime was awarded the contract, assuming an 8% net profit margin to be recognized over a 2 year period, the net incremental yearly contribution to Sime is about RM40m p.a.. This is relatively small at slightly above 1% increment to Sime's FY08 and FY09 net profits of around RM3.5bn each year. Maintain Hold on Sime and unchanged target price of RM9.65 based on 17x CY09 EPS.