Kenanga initiate coverage on Suria stock. Current price RM2.59 with Suria fair value of RM3.43.
The price didnt move much. Maybe valuation not good enough? Or price and volumn have increased recently/previous day.
According to TA Securities....., Carimin Petroleum Bhd (Carimin) is an O&G contractor that provides hook-up and commissioning (HUC), platform maintenance, and manpower services.
Carimin was one of the winners of Petronas’ Pan Malaysia HUC contract in 2013. The bulk (89%) of Carimin’s RM900mn orderbook comprises of this contract currently. Therefore, our primary concern is that the group may emerge as a one trick pony if it doesn’t manage to secure sizeable new contracts outside of HUC.
To recap, there will be no new tenders for local HUC contracts until expiry of the Pan Malaysia umbrella contract in 2018. Nevertheless, we understand that the group is actively bidding for maintenance projects to replenish its orderbook. In fact, we believe the group stands a fair chance to secure a package from Petronas’ upcoming RM1.5bn Pan Malaysia Inspection, Repair, and Maintenance (IRM) contract. On top of that, there will also be earnings upside from:- 1) additional work orders for Pan Malaysia HUC, 2) more vessel acquisitions, 3) diversification into marine services, and 4) yard upgrade.
We arrive at a fair value (FV) of RM1.12 for Carimin based on 12.0x CY15 P/E. This is in-line with its peers’ average, and at a 6% discount to the mean of its peers in the HUC & Brownfield segment. The recent weakness in crude oil price could cap near term share price performance. Nonetheless, we reiterate the potential of the stock price if management delivers on contract replenishment.
FV of RM1.12 at 12x CY15 P/E. We arrive at a fair value (FV) of RM1.12 for Carimin based on 12.0x CY15 P/E. This is in-line with its peers’ average, and at a 6% discount to the average of its peers in the HUC & Brownfield segment (Dayang and Petra Energy). The discount is to reflect Carimin’s much smaller market cap and order book relative to the latter two. Carimin’s size is merely 10%-12% of Dayang and Petra in terms of market cap, whilst its fleet size is smaller too, with its competitors having 8-9 vessels each.
We stress that there is potential upside to our estimates and FV if the following catalysts emerge, which we have not factored into our forecasts:- 1) additional ad-hoc jobs with higher margin for Pan Malaysia HUC, 2) the group secures a package from Pan Malaysia IRM contract, and 3) new contracts to replenish orderbook. The recent weakness in crude oil price could cap near term share price performance. Nonetheless, we reiterate the potential of the stock price if management delivers on contract replenishment.
I saw Carimin dividend yield zero in that report.