Tuesday, Nov 05, 2002
MARC has assigned a long term rating of A-ID (Single A minus, Islamic Debt) in respect of Sapura Energy Sdn Bhd’s (SESB) proposed RM140 million Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS). The rating reflects the SESB group’s strong market position in subsea and marine engineering activities; provision of maintenance services for light and heavy industrial turbines; provision of the total management system for petrol stations and synergistic benefits from the acquisition of the Sarku group of companies. The rating is, however, moderated by the group’s high debt leverage. The operating environment is characterized by high capital expenditure, high operating costs and demands for high safety standards.
SESB, a wholly owned subsidiary of Sapura Holdings Sdn Bhd; is the Sapura Group’s vehicle in the energy sector. The SESB group is involved in the provision of operation and maintenance services for the oil and gas, marine and power utility industries. SESB recently acquired the Sarku group of companies in order to support its integrated business.
SESB operates five business units comprising power, maintenance, marine engineering, automation and asset management. With this wide range of capabilities, SESB is able to offer clients single or multidiscipline outsourced requirements. Nearly half of the group’s revenue of RM37.5 million in fiscal year January 2002 was derived from the automation business unit, that can be attributed to a large secured contract for the installation and maintenance of the total management system for PETRONAS’ service stations. Going forward, the Sarku group of companies is expected to contribute more than 70% of the revenue over the tenure of the BaIDS issue.
SESB’s marine engineering business unit, a major revenue contributor, is engaged in nearshore/inshore (services and trading) and offshore marine engineering activities. Another of the group’s major activity is the provision of maintenance services for the users of both light industrial turbines (LIT) and heavy industrial turbines (HIT), undertaken by the group’s power unit. The group’s competitive edge in the maintenance of LITs is its ability to provide maintenance services for multiple brands of LIT, while in the area of HITs, the group has established the first full service component repair facility in the region.
The Sarku group of companies is involved in the provision of underwater inspection repair and maintenance, topside major maintenance and hook-up and commissioning, vessel services and onshore plant maintenance. Supporting the group’s operations are six vessels, owned by the group. Underwater services and topside major maintenance contributes approximately 70% of the Sarku group’s revenue and the remaining 30% is from hook-up and commissioning activities and vessel charter.
The group’s main clientele comprises established oil and gas companies; minimizing counterparty credit risks in respect of its contracts. Given the massive investments that will be made in the oil and gas industry in the medium term, the outlook for oil servicing companies such as SESB appears positive.
Prior to the acquisition of the Sarku group of companies, SESB group’s operating profit margin has historically been thin due to high operating costs. The group is, however, expected to benefit from the acquisition of the Sarku group which historically recorded high operating profit margin. Going forward, SESB group’s performance will be driven by contribution from the Sarku group; projected to account for over 70% of future consolidated revenue.
SESB group’s debt servicing capacity is projected to be strong over the period of the BaIDS, under its base case cash flow projection. The progressive redemption of the primary BaIDS over the tenure of the BaIDS reduces refinancing risk at the final maturity date of the facility. SESB group’s debt leverage remains high at over four times as at end Jan 2002, that will somewhat constrain its financial flexibility.
SESB, a wholly owned subsidiary of Sapura Holdings Sdn Bhd; is the Sapura Group’s vehicle in the energy sector. The SESB group is involved in the provision of operation and maintenance services for the oil and gas, marine and power utility industries. SESB recently acquired the Sarku group of companies in order to support its integrated business.
SESB operates five business units comprising power, maintenance, marine engineering, automation and asset management. With this wide range of capabilities, SESB is able to offer clients single or multidiscipline outsourced requirements. Nearly half of the group’s revenue of RM37.5 million in fiscal year January 2002 was derived from the automation business unit, that can be attributed to a large secured contract for the installation and maintenance of the total management system for PETRONAS’ service stations. Going forward, the Sarku group of companies is expected to contribute more than 70% of the revenue over the tenure of the BaIDS issue.
SESB’s marine engineering business unit, a major revenue contributor, is engaged in nearshore/inshore (services and trading) and offshore marine engineering activities. Another of the group’s major activity is the provision of maintenance services for the users of both light industrial turbines (LIT) and heavy industrial turbines (HIT), undertaken by the group’s power unit. The group’s competitive edge in the maintenance of LITs is its ability to provide maintenance services for multiple brands of LIT, while in the area of HITs, the group has established the first full service component repair facility in the region.
The Sarku group of companies is involved in the provision of underwater inspection repair and maintenance, topside major maintenance and hook-up and commissioning, vessel services and onshore plant maintenance. Supporting the group’s operations are six vessels, owned by the group. Underwater services and topside major maintenance contributes approximately 70% of the Sarku group’s revenue and the remaining 30% is from hook-up and commissioning activities and vessel charter.
The group’s main clientele comprises established oil and gas companies; minimizing counterparty credit risks in respect of its contracts. Given the massive investments that will be made in the oil and gas industry in the medium term, the outlook for oil servicing companies such as SESB appears positive.
Prior to the acquisition of the Sarku group of companies, SESB group’s operating profit margin has historically been thin due to high operating costs. The group is, however, expected to benefit from the acquisition of the Sarku group which historically recorded high operating profit margin. Going forward, SESB group’s performance will be driven by contribution from the Sarku group; projected to account for over 70% of future consolidated revenue.
SESB group’s debt servicing capacity is projected to be strong over the period of the BaIDS, under its base case cash flow projection. The progressive redemption of the primary BaIDS over the tenure of the BaIDS reduces refinancing risk at the final maturity date of the facility. SESB group’s debt leverage remains high at over four times as at end Jan 2002, that will somewhat constrain its financial flexibility.