Sapura energy slips to all-time low amid concerns over likely sales of distressed assets
KUALA LUMPUR (December 7): Sapura Energy Bhd became one of the main actively traded windows on the local stock exchange on Tuesday, December 7 as its shares hit an all-time low of 5.5 sen.
At the opening bell, the stock opened one sen or 12.5% lower at seven sen before falling further to a low of 5.5 sen. It has seen 170.8 million shares change hands at the time of writing.
At 5.5 sen, the oil and gas (O&G) service provider is valued at RM 878.85 million.
On Monday (December 6), UOB KayHian lowered its call for Sapura Energy to “sell” and reduced its price target to three sen (instead of 10 sen).
“We anticipate new sales pressure [on Sapura Energy] As rumors of his distress and the urgency to sell assets have reached major oil and gas newspapers, the timeline for reviewing covenants waivers is approaching, a low probability of selling assets at a decent price, continued losses and potentially lower leverage to renegotiate covenants after changes in key personnel.
“While developments can be choppy, we assume the worst-case scenario for bankruptcy,” the research house said.
UOB KayHian added that depending on developments, it is possible that selling pressure may persist as markets start pricing Sapura Energy in the same way as other O&G PN17 stocks (which have also faced violations covenants, liquidity problems or defaults).
On December 2, the global energy information portal Upstream online reported that cash-strapped Sapura Energy appears to have received a heavy blow by failing to qualify for Kasawari’s phase two engineering and design contract, Petronas’ award, the financial difficulties of the entrepreneur being considered a determining factor.
For the second quarter ended July 31, 2021 (2QFY22), the group reported a net loss of RM 1.52 billion, largely from the Engineering and Construction (E&C) division of Sapura Energy, in due to the provision for foreseeable losses and higher project costs of the stacking works of offshore wind farms in Taiwan and another project in India.
Sapura Energy had accumulated losses of RM 6.24 billion at the end of July after the last kitchen sink exercise in 2QFY22, in addition to the record quarterly loss of RM 4.23 billion in 4QFY20 – in largely due to the depreciation of assets and goodwill at the time.
Its total borrowing reached 10.88 billion ringgit, with net indebtedness reaching 1.33 times. Meanwhile, net assets per share fell to 48 sen.