(Updated)

Sapura Energy slips to all-time low amid concerns of likely distressed asset sales

Sapura Energy slips to all-time low amid concerns of likely distressed asset sales
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KUALA LUMPUR (Dec 7): Sapura Energy Bhd emerged as the top actively traded counter on the local bourse on Tuesday (Dec 7) as its shares hit an all-time low of 4.5 sen.

At the opening bell, the stock opened one sen or 12.5% lower at seven sen before falling to an intraday low of 4.5 sen. 

The stock then tumbled three sen or 37.5% to close at five sen. It was the most actively traded stock on the local bourse with 400.38 million shares changing hands, almost 10 times its 200-day trading average of 47.86 million shares.

At five sen, the oil and gas (O&G) service provider is valued at RM798.95 million.

On Monday (Dec 6), UOB KayHian downgraded its call on Sapura Energy to "sell" and cut its target price to three sen (from 10 sen).

"We foresee further selling pressure [on Sapura Energy] given rumours of its distress and urgency to sell assets have reached main oil and gas newspapers, the timeline to review covenant waivers is nearing, a low likelihood of selling assets at a decent price, continued losses, and potentially lower leverage to renegotiate covenants after changes in key personnel.

"While developments may be choppy, we assume a worst-case bankruptcy scenario," the research house said.

UOB KayHian added that depending on developments, there is a chance that selling pressure may persist when markets start to price Sapura Energy similar to other PN17 O&G stocks (which also faced covenant breaches, liquidity issues or loan defaults).

On Dec 2, global energy news portal Upstreamonline reported that cash-strapped Sapura Energy looked to have been dealt a blow by failing to qualify for Petroliam Nasional Bhd's prized Kasawari phase two front-end engineering and design contract, with the contractor's financial woes said to be a determining factor.

For the second quarter ended July 31, 2021 (2QFY22), the group reported a RM1.52 billion net loss, which came largely from Sapura Energy's engineering and construction division, due to provision for foreseeable losses and higher project costs from the offshore wind farm piling works in Taiwan, and another project in India.

Sapura Energy accumulated losses of RM6.24 billion at end-July after the latest kitchen-sinking exercise in 2QFY22, on top of the record quarterly loss of RM4.23 billion in 4QFY20 — largely due to asset and goodwill impairment then.

Its total borrowings grew to RM10.88 billion, with its net gearing hitting 1.33 times. Meanwhile, net assets per share shrank to 48 sen.

Surin Murugiah & Lam Jian Wyn