- QoQ, net profit rose 30.8% due to the increase in IPF division earnings (+99%) with the start-up of the PCSB Umbrella contract and reduction in Marine Services division losses (-81.4%). JV earnings (RM11.3m) were sequentially down (Q4FY10: RM27.5m) due to skewed 4QFY10 on write back of over-provisions for some previously completed projects and a slight delay in the start up of the SapuraAcergy for the year.
- YoY, net profit gained a whopping 97.5% again mainly on better margins from the IPF (+8.8ppts) and drilling (+9.7 ppts) divisions. The PCSB Ubrella project win and commendable JV contributions bumped up IPF argins , while improved drilling margins were caused by higher drilling charter rates garnered in FY10 for T9 and Teknik Berkat. Overall, net margins expanded 4.0ppts (1QFY11: 7.6%; 1QFY10: 3.6%).
- Prospects intact for FY11. Management is positive as contracts are lockedin for their main earnings drivers (IPF, drilling divisions and their JVSapuraAcergy); whilst optimisation of their fleet will continue as they mobilise their new assets (the L&T and Quippo-Prakash pipe-lay barges) which they have already received . Guided for profitable marine services division, within the year, will lend strength to bottom -line numbers, while to date RM8.1b order book (TLO: RM4.7b/ JV: RM1.9b (50% of RM3.7b)/ Drilling: RM0.7b/Marine Services RM0.8b) will last them at least 2 years based on their burn rate of RM3.5b per annum. Tender book is RM3b and increasing.
- Maintain BUY at RM3.09 TP on 18x FY11F. Our positive view on the stock remains gi ven their locked-in prospects. Earnings catalyst will come from the Group’s push for an expanded regional base (India/Australia/Japan) and sustained charter rates for their drilling contracts.
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