Saturday March 1, 2008

Analysts: Scomi Group’s huge profit not a surprise

NEWS ANALYSIS
By LOONG TSE MIN

SCOMI Group Bhd's net profit for the year ended Dec 31, 2007 (FY07) almost tripled to RM257mil compared with RM92.4mil in the previous year.

However, according to a KL-based senior analyst at a foreign brokerage, the strong profit performance came largely on an exceptional gain from the sale of 19.9% equity stake in Scomi Oilfield Ltd for US$99.5mil last March to Standard Chartered Pte Equity Ltd, as well as a lower tax rate of about 2%.

Total income tax expense stood at RM4.26mil compared with RM12.98mil in 2006.

“These two factors have been expected since last August, and so weren't much of a surprise,” the analyst said, adding that in terms of “core” earnings, Scomi Group's performance was slightly above expectations.

SJ Securities, in a report dated yesterday, concurred, saying: “The group's revenue and core earnings exceeded our estimates by 5.5% and 2.3% respectively”.

The brokerage estimates the group's core earnings for FY07 as growing 26.7% to RM117.1mil on the back of a 24% rise in revenue.

The analyst at the foreign brokerage said Scomi Group was now trading at quite a low valuation of RM1.07 per share as of yesterday's closing, mainly due to a cautious market.

Scomi Group had also experienced delays in some of its projects, he said.

“When there are new projects and new clients, you could expect some hold-ups.”

The analyst, who has a positive call on the counter, expects growth to remain good in 2008, with the delayed projects expected to be underway and the oil and gas (O&G) sector still going strong.

He added, however, that the market could still be cautious on the stock.

SJ, which maintains its “overweight” call on Scomi Group, said: “We believe the group provides good exposure to the higher exploration and production activities in O&G and indirect play on the Ninth Malaysia Plan.”

Scomi Group recorded revenue of RM1.96bil for FY07 compared with RM1.58bil in 2006.

For the fourth quarter ended Dec 31, 2007, group net profit grew 32.91% to RM28.25mil on revenue of RM522.4mil.

According to a company statement, about 93% of the turnover was contributed by two key divisions: oilfield services, and energy and logistics engineering.

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