Published: Wednesday February 13, 2013 MYT 11:33:00 AM

RHB Research maintains Buy on SapuraKencana, FV RM3.39

KUALA LUMPUR: RHB Research Institute is maintaining its Buy recommendation on SapuraKencana Petroleum Bhd with a fair value of RM3.39.

It said on Wednesday it continues to be positive on SapuraKencana's acquisition of Seadrill's tender rig business for US$1.74bil, via debt and equity.

This would comprise of US$350mil via issuance of shares to Seadrill at RM2.70; US$238mil through the issuance of three-year redeemable exchangeable preference shares to Seadrill at RM2.70; US$187mil (RM580mil) through issuance of sellers note to Seadrill; 4) US$250mil (RM775mil) through share placement to investors yet to be identified at RM2.70; and 5) the balance of approximately US$712mil via borrowings.

"We continue to be positive on the deal, as it remains EPS accretive even with an enlarged share base of 19.2%. Furthermore, post-completion, SapuraKencana would be the biggest tender rig operator in Southeast Asia and the world," it said.

RHB Research said its fair value was reduced to RM3.39, from RM3.59 based on unchanged 19 times FY01/14 proforma EPS.

It reduced the FY01/14 proforma EPS after including lower contribution from the tender rig business given the later-than-expected completion of this deal, which it initially expected to be complete by end-FY01/13.

“All in, we estimate the whole deal to provide SapuraKencana with incremental net profit of RM330mil or 44% for FY01/14. After taking into account the EPS dilution from the enlarged share base, coupled with the incremental interest cost arising from the additional debt issued, we estimate that the whole deal would provide 21%-22% in EPS accretion for FY01/14,” it said.

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