SKPETRO – Fundamental Analysis (12 Apr 2016)

Excel – Download the analysis file

Latest Financial – Q4 2016 Financial Report (25 Mar 2016)

FY16 Q4 Results Highlight:

  • Despite reported FY16 net profit sinking into the red at –RM791.6m, SKPETRO’s normalised net profit excluding provisions on oil & gas properties, investments and other non-core items managed to remain above >RM1b. The large chunk of the provisions was from the Energy division (net RM1.1b), followed by Drilling division (RM400m) and Engineering and Construction division (RM203m).
  • SKPETRO’s FY16 operating cash flow rose to RM2.7b from RM1.8b a year earlier. Total cash pile was close to RM2b compared to RM1.2b a year earlier. This is also translate into free cash flow of RM2.17b in FY16. In addition, the company has started reducing the principal on its borrowings by repaying a net RM650m in FY16. Management guided that the group’s total borrowings are expected to reduced moving forward.
  • 23 Dec 2015 – SKPETRO’s current orderbook as at 31 Oct 2015 stood at approximately RM21b. volume of orders slows down due to poor oil prices
  • SKPETRO conduct quarterly reviews (previous: annual) on oil price assumption and reserves for their O&G portfolio. This shows a good corporate governance

Valuation:

  • In my opinion, fair value of SKPETRO range from 1.9 to 2.1 (Uncertainty Risk: MEDIUM to HIGH).

Going Forward:

  • Major concerns – Low crude oil selling price, weak orderbook replenishment, further asset writedowns, and reduced drilling fleet utilisation coupled with declining daily-charter-rates.
  • I will continue to hold and accumulate SKPETRO as I believe that SKPETRO will be able to overcome the challenges ahead.

At the time of writing, I owned shares of SKPETRO.

One thought on “SKPETRO – Fundamental Analysis (12 Apr 2016)

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