Monday, Dec 19, 2005
MARC has reaffirmed the rating for Sapura Energy Sdn Bhd’s (SESB) RM140 million Al-Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS) at AID reflecting the company’s strength in the marine engineering business; synergies arising from the consolidation of the company under SapuraCrest Petroleum Berhad (SapuraCrest); and its stable financial profile. The rating, however, is moderated by the relatively high but declining debt leverage position; and increasing competition in the local marine engineering market.
SESB’s main revenue generator continues to be the marine engineering division (85%); supported by a fleet of eight vessels. Apart from marine engineering, SESB’s revenue is supplemented by its other divisions namely, maintenance, power, automation and asset management. As shallow-water oil and gas exploration activities in Malaysia are reaching maturity, there will be increasing emphasis on deepwater exploration which will be beneficial for SESB which owns vessels that are able to navigate the deepwaters. Due to the large number of players in the industry, the group is slowly venturing into the Indian, Indonesian, Vietnam and Thailand markets.
SESB’s list of clients includes established and reputable corporations such as PETRONAS, ExxonMobil and Shell which carry high credit ratings. As such, credit risk is relatively low.
Revenue continued on an upward trend, underpinned by additional contracts secured from existing clients during the year. In line with the revenue growth, pre-tax profit recorded a 40.1% growth to reach RM33.2 million, by far the highest in its operating history. Operating margin remained in double digits and edged up to 13.2% from 12.2% previously.
SESB’s debt leverage level has improved over the last three years, aided by the growth in retained earnings. The second redemption of RM25.0 million due in December 2005 is expected to further reduce its debt-equity ratio. As at July 2005, the balance in the Finance Service Reserve Account was RM30.06 million, sufficient to meet the second principal repayment of RM25.0 million and secondary BaIDS payment of RM4.9 million respectively.
Financial flexibility appears moderate and may be drawn from its listed holding company, SapuraCrest, and to some extent, its unutilized credit lines.
Sustainability of its double digit operating profit margins as reflected in its six-months interim results ended July 2005, however, remains unclear due to the conclusion of a contract under Sarawak Shell. Nevertheless, with total contracts in hand of approximately RM467.0 million coupled with the group’s ability to secure new contracts, SESB’s cashflow position is expected to be manageable in the near term.
SESB’s main revenue generator continues to be the marine engineering division (85%); supported by a fleet of eight vessels. Apart from marine engineering, SESB’s revenue is supplemented by its other divisions namely, maintenance, power, automation and asset management. As shallow-water oil and gas exploration activities in Malaysia are reaching maturity, there will be increasing emphasis on deepwater exploration which will be beneficial for SESB which owns vessels that are able to navigate the deepwaters. Due to the large number of players in the industry, the group is slowly venturing into the Indian, Indonesian, Vietnam and Thailand markets.
SESB’s list of clients includes established and reputable corporations such as PETRONAS, ExxonMobil and Shell which carry high credit ratings. As such, credit risk is relatively low.
Revenue continued on an upward trend, underpinned by additional contracts secured from existing clients during the year. In line with the revenue growth, pre-tax profit recorded a 40.1% growth to reach RM33.2 million, by far the highest in its operating history. Operating margin remained in double digits and edged up to 13.2% from 12.2% previously.
SESB’s debt leverage level has improved over the last three years, aided by the growth in retained earnings. The second redemption of RM25.0 million due in December 2005 is expected to further reduce its debt-equity ratio. As at July 2005, the balance in the Finance Service Reserve Account was RM30.06 million, sufficient to meet the second principal repayment of RM25.0 million and secondary BaIDS payment of RM4.9 million respectively.
Financial flexibility appears moderate and may be drawn from its listed holding company, SapuraCrest, and to some extent, its unutilized credit lines.
Sustainability of its double digit operating profit margins as reflected in its six-months interim results ended July 2005, however, remains unclear due to the conclusion of a contract under Sarawak Shell. Nevertheless, with total contracts in hand of approximately RM467.0 million coupled with the group’s ability to secure new contracts, SESB’s cashflow position is expected to be manageable in the near term.