Date: 27th September 2024
Broker: UOB Kay Hian

Company Overview

Sapura Energy is a Malaysian-based integrated oil and gas services and solutions provider. It offers a wide range of services, including engineering, construction, drilling, and exploration. The company is listed on the Malaysian Stock Exchange under the ticker SAPE MK.

FY25 Half-Year Financial Performance

For the first half of FY25, Sapura Energy reported a core profit that exceeded market expectations. This positive performance came despite ongoing execution risks. The company’s strong financial results were driven by improved operational efficiency and cost management, signaling a recovery phase following previous challenges.

Reduced Downside Risk

Sapura Energy’s current stock price has limited downside risk, according to UOB Kay Hian. The company has made significant progress in mitigating the risks that previously affected its financial stability. With improved financial performance and a favorable market environment, the company’s stock now presents a more attractive risk-reward profile.

Upgrade to “BUY”

UOB Kay Hian has upgraded Sapura Energy to a “BUY” recommendation, with a target price of RM0.07. This upgrade is based on the company’s better-than-expected half-year results and the limited downside risk at its current stock price. The company’s strong recovery, despite execution risks, suggests that it is on a path toward improved profitability.

Outlook for FY25

The outlook for Sapura Energy remains optimistic as the company continues to focus on improving its operational efficiency and reducing costs. While execution risks persist, the company is expected to deliver stronger results in the second half of FY25. The company’s ability to manage its projects effectively will be crucial to sustaining profitability and growth.

Risks

Despite the positive outlook, Sapura Energy still faces significant execution risks, especially in managing its projects within budget and timelines. Additionally, fluctuations in oil prices and global economic uncertainties could impact its operations and profitability.

Conclusion

Sapura Energy’s strong half-year results for FY25, coupled with limited downside risk, make it an attractive investment at current price levels. The company’s focus on operational improvements and cost management, along with the upgrade to a “BUY” rating, reflects confidence in its recovery and future growth potential. However, investors should remain mindful of the ongoing execution risks that could impact the company’s performance.