By AffinHwang Capital
Target price: 40 sen
Sapura Energy’s recent announcement of a potential listing of its exploration and production (E&P) business is positive in the long run, said AffinHwang, as it would allow the group to unlock value and not be dragged down by the two existing business segments.
However, this deal also works as a double-edged sword, said the research house, as it believes that if the E&P business is “carved out” completely, then Sapura Energy would lose its appeal for many existing investors who believe in the monetisation potential of its gas fields.
“Although still at an early stage, any move towards carving out the E&P division entirely for a separate listing, may therefore not be value-accretive to the currently listed Sapura Energy,” it said.
The market’s biggest concern is regarding the outlook of its engineering and construction and drilling divisions, according to the research house.
“Earnings have been on a declining trend with the drilling division falling into losses due to low rig utilisation. While oil price has been trending upwards, oil majors’ capital expenditure remains lacklustre.
“As such, we believe that order book replenishment risks will continue to be investors’ main concern.”
AffinHwang highlighted that Sapura Energy had completed a few acquisitions in recent years, which saw its non-current assets expanding.
Sapura Energy purchased Seadrill tender and semi tender rigs business for US$2.6bil (RM10bil) in April 2013, resulting in the book value increasing from RM2bil in 2012 to RM10.6bil in 2017.
It subsequently acquired Newfield’s oil and gas (O&G) blocks in Malaysia and now has a RM4.4bil expenditure on O&G properties on the book.
“Sapura Energy is currently sitting on RM8.5bil of goodwill post completion of the Sapura Crest and Kencana Petroleum merger and acquisition of Seadrill,” it said.
The research house has cut its 2019 earnings per share forecast by 25%, but raised its 2020 earnings outlook by 18% as it pencilled in a stronger ringgit and Brent oil assumption.
By RHB Research Institute
Target price: RM2.76
DRB-Hicom announced the proposed disposal of its non-industrial property assets and its entire hospitality portfolio to Prisma Dimensi and Kelana Ventures Sdn Bhd.
RHB Research noted that the total market value of assets to be disposed totalled RM2bil, compared with the sale consideration of RM1.93bil to be satisfied via 1,243.4 acres of freehold land in Tebrau, Johor Baru and cash of RM288.7mil.
“The RM1.65mil price for the Tebrau land translates to approximately RM30 per sq ft, which we believe is fair.
“The cash proceeds would be used mainly for scheduled repayment for DRB-Hicom’s Islamic medium term notes and expenses relating to the proposed disposals,” it said.
The research house said the proposed acquisition of the Tebrau land marked a change in strategic direction for DRB-Hicom’s property division, which would now focus on the development and sale of industrial properties.
“It has an additional 600 acres of landbank to be developed as industrial parks.
“This landbank is located in Tanjung Malim, Perak; Shah Alam, Selangor; Bukit Kayu Hitam, Kedah; and Alor Gajah, Melaka,” said the research house.
RHB Research pointed out further that its landbank in Johor is situated within the development region of Iskandar Malaysia –close to major townships and served by various highways.
“DRB-Hicom intends to develop the Johor land into a modern industrial zone park comprising terrace factories, semi-detached factories and purpose-built detached factories components.
“This would be together with commercial development, worker hostel complex and community facilities, with an estimated gross development value of RM4.2bil.
“The said proposed development is expected to commence in 2020 over ten years, although these plans are subject to change, given the soft Johor property market,” the research house said.
By AmInvestment Research
Fair Value: RM2.20
Prestariang announced that it has entered into a memorandum of understanding (MoU) with Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) to utilise EduCloud, an integrated education platform (IEP) owned by Prestariang, as the digital platform for the management of digital ID, student borrowers’ engagement and job matching.
The collaboration aims to drive engagement and employability of student borrowers.
Prestariang and PTPTN agree to set out the working relationship, the terms and conditions of the collaboration and subsequently forge a definitive legally binding agreement between both parties by April 30, 2018.
“The MoU will expire on Dec 31, 2018, if no definitive agreement is effected,” said AmInvestment Research.
It added that the first phase of the collaboration would entail up-skilling and re-skilling existing PTPTN borrowers through a “place and train” model – first, match student borrowers with a job in accordance to industry requirements and subsequently provide training to enhance their potential and employability.
“The programme, called Job Matching, would incentivise PTPTN borrowers to engage EduCloud to seek valuable trainings/ courses.”
Some of Prestariang’s partners which would support the Job Matching programme include Amazon Web Services, Alibaba Cloud, CXS Analytics, Encap, Mastercard, Microsoft, OpenLearning, Skillsoft, UniMy and others.
AmInvestment Research said the partners would serve to offer their industry courses and job opportunities.
“While we are mildly positive on the development, management has not guided on its financial implications,” it said.
“Intuitively, the collaboration would allow Prestariang to leverage PTPTN’s large borrowers base to increase UniMy’s student intakes and offer paid training courses through the platform.”
Citing a local news report, the research house said there were 2.8 million PTPTN borrowers currently, adding that the number increases by around 200,000 yearly.
“However, we wish to caution that the execution of such projects can be challenging, as we draw reference to Prestariang’s previous job placement website, Talent Xchange.
“The project has not brought meaningful contribution to the group thus far, and the website gives the appearance of being migrated to the PTPTN Job Matching website,” the research house said. -thestaronline