KUALA LUMPUR: AmInvestment Research is maintaining its Hold recommendation for Sapura Energy with a lower fair value of RM1 a share from an earlier RM1.54 a share by widening the discount to FY19F book value from 30% to 50%. 

“We have reversed our earlier earnings projections to a loss of RM563mil in FY18F and RM392mil in FY19F due to cuts in our drilling rig utilisation assumptions from 50% to 40% together with a 30% cut in new order book assumptions,” it said. 

AmInvest Research said as a comparison, consensus estimates a net profit of RM88mil for FY18F and RM224mil for FY19F.

It pointed out that excluding a RM46mil loss from the acquisition of the remaining 50% stake in SapuraAcergy at below book valuation, Sapura Energy’s’s 9MFY18 normalised loss of RM172mil (vs. a RM343mil net profit in 9MFY17) was a shock as the group suffered a 3QFY18 normalised loss of RM228mil. 

This occurred even though Sapura’s strongest quarters are in the second and third quarters due to the usual lower asset utilisation rates during the monsoon season in the first and fourth quarters.
 
“Given the likelihood of additional asset impairments in 4QFY18, we view the 53% discount to book value as justified,” it said.