Oil and Gas Sector Update: SOGT Finally Awarded? - 01/09/2010

PP 7767/09/2010(025354)
RHB Research
Corporate Highlights
Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M
S e cto r Upd at e
1 September 2010
MARKET DATELINE
Recom : Neutral
Oil And Gas (Maintained)
SOGT Finally Awarded?
Table 1 : Oil And Gas Sector Valuations

Fair EPS EPS growth PER P/NTA P/CF GDY
Price
FYE value (sen) (%) (x) (x) (x) (%) Rec
(RM/s) (RM/s) FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY10 FY10
Dialog Jun 1.10 1.30 6.1 8.8 14.9 44.8 18.1 12.5 4.3 15.9 3.0 OP
P Gas^ Mar 10.50 11.63 71.0 72.9 49.4 2.7 14.8 14.4 3.3 10.5 7.2 OP
Kencana July 1.54 1.56 8.0 12.0 11.3 50.9 19.3 12.8 3.2 13.3 0.4 MP
SapuraCrest^ Jan 2.31 2.46 16.9 18.9 26.5 12.0 13.7 12.2 2.2 8.2 3.0 MP
Wah Seong Dec 2.00 1.89 10.3 14.5 -20.9 40.6 19.4 13.8 1.7 15.4 1.9 UP
Petra Perdana Dec 1.19 0.50 -11.5 5.3 (>100) +>100 n.m. 22.6 0.8 46.0 1.7 UP
KNM Dec 0.49 0.37 1.3 3.7 -66.0 +>100 37.9 13.0 7.8 13.8 4.1 UP
Sector Avg 14.6 14.5 15.3 13.4
Sector Avg (excl Pet Gas) -12.8 39.2 16.4 11.8
^ FY10-11 valuations refer to those of FY11-12
SOGT finally awarded. It was reported in The Business Times that Korean
Table 2. Basis For Fair Value Estimates
company Samsung Engineering had been awarded a US$770m (RM2.4bn)
Company Valuation Basis
contract from Petronas Carigali (PCSB) to build an oil and gas terminal in
Dialog Target PER of 15x FY06/11,
Sabah which we believe is the long awaited SOGT project. The terminal would
premium to the sector
have the capacity to produce 300,000 barrels of oil and 1.25bn cubic feet of benchmark due to good
gas per day and is tentatively scheduled for completion by 2013. Samsung management and robust
Engineering will lead the engineering, procurement, construction and balance sheet.
commissioning (EPCC) works while its local partner is Naim Cendera S/B Kencana Target FY07/11 PER at 13x,
Engineering (NCSB), a Sarawak-based construction subsidiary of Naim in line with the sector
Holdings Bhd. benchmark.
♦ Background. Recall, the project involves a receiving terminal located in

KNM Target FY12/11 PER at 10x to
factor in higher earnings risk.
Kimanis, Sabah, which will be the landing point for oil and gas produced from
Petra P’dana Target FY12/11 PER at 10x
Sabah’s offshore deepwater fields. We understand that the gas will be piped for marine, plus share of
down to Petronas’ LNG complex in Bintulu via the still-in-construction Sabah- Petra Energy’s FV at 9x, to
Sarawak Gas Pipeline (SSGP) while the crude oil will be received and stored at factor in higher earnings risk.
the terminal then loaded into vessels for export through single point moorings PetGas DCF
(SPMs) located offshore Kimanis. A groundbreaking ceremony was first SapCrest Target FY01/12 PER at 13x,
officiated in 2007 and the project was initially expected to cost around in line with the sector
RM1.5bn, but changes in detailed engineering design and equipment benchmark.
Wah Seong Target FY12/10 PER at 13x,
specifications have delayed the awards till now and increased the cost of the
in line with the sector
project.
benchmark.
♦ Naim Cendera, a new player. While Samsung Engineering has significant Source: RHBRI
experience in energy projects in the Middle East, Africa and South East Asia, its
local partner Naim Cendera is relatively new to the oil and gas sector, with
their latest awards being from Assar Senari for the construction of an oil and
gas jetty in Tanjung Manis in July 2010. Nevertheless, we suspect their
involvement is mainly due to their civil expertise, while Samsung Engineering
will handle the technical part of the project. Other bidders had included
Kencana and Dialog.
♦ Near-term uncertainty still intact. We expect contract awards to gain
momentum going into the tail-end of FY10, with the next awards likely to be
for brownfield maintenance. Beneficiaries are the likes of Kencana, Dayang,
Sapuracrest and Petra Energy. While this bodes well for the sector, we expect
the new wins to only impact companies’ earnings in FY11. In the near term, we Yap Huey Chiang
maintain our view that the direction of crude oil prices remains unconvincing, (603) 92802239
while trading sentiment may drive stocks. We thus maintain our Neutral yap.huey.chiang@rhb.com.my
stance on the sector for now. Our top pick is Dialog (OP, FV = RM1.30).
Please read important disclosures at the end of this report.

Page 1 of 3
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Figure 1: Sabah Oil and Gas Terminal (SOGT) and Sabah-Sarawak Gas Pipeline (SSGP) project
Site for Oil and Gas

Terminal (Kimanis)
Source: PETRONAS
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PP 7767/09/2010(025354)

SOGT Finally Awarded?

Table 1 : Oil And Gas Sector Valuations

♦ Background. Recall, the project involves a receiving terminal located in

Please read important disclosures at the end of this report.

Site for Oil and Gas

The recommendation framework for stocks and sectors are as follows : -

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