Sapura Energy, Unisem up on corporate development

by LYDIA NATHAN / Photo by courtesy of SAPURA ENERGY

Sapura Energy Bhd’s shares price rallied 25% or nine sen to 44.5 sen a share yesterday as investors bought into the company’s plan to sell a 50% stake in its wholly owned subsidiary Sapura Upstream Sdn Bhd to Austria’s OMV Aktiengesellschaft.

The stake plan will incidentally pave way for a strategic partnership and could replace its proposed listing exercise for the unit, which has been given an enterprise value of US$1.6 billion (RM6.64 billion).

Sapura’s daily trading volume hit close to the 500 million mark and accounted for a fifth of the total market volume of 2.37 billion shares yesterday.

In a research report, MIDF Research noted the proposed partnership between Sapura and OMV is a better option than a listing, as it will be a faster alternative which can eliminate the potential discount given by the capital market.

“Sapura is expected to benefit from new opportunities in the upstream segment and increase market reach for its services segment where OMV operates in,” it said.

MIDF expects Sapura’s forward earnings to further improve and benefit from the reduced constraint on its cash attributable to the upstream business.

Sapura saw its share price take a hit last month after announcing a rights issue to raise RM4 billion.

For the first quarter ended April 30, 2018, Sapura recorded a net loss of RM136 million, mainly attributable to the lower revenue from the drilling and engineering and construction (E&C) divisions.

Revenue from E&C dropped 44.6% year-on-year (YoY) to RM666 million, while drilling saw its contribution decrease by 52.4% YoY to RM183 million.

Exploration and production (E&P) contributed 8% more in revenue YoY to RM210 million, making up the total top line of RM1.05 billion for the quarter.

“Therefore, for FY19F in particular, we are expecting the group to return to the black,” MIDF said, adding that the chunk of the group earnings will stem from the upbeat offshore activity levels of the E&C segment and sustainably higher crude oil prices of the E&P segment.

For the semiconductor concern, Unisem (M) Bhd, which has received an RM1.82 billion takeover offer from its chairman John Chia Sin Tet and China’s Tianshui Huatian Technology Co Ltd (TSHT) rose 13 sen, or 4.4%, to RM3.10, slightly below the RM3.30 a share bid made by the offerers.

TSHT does not hold any Unisem share, while Chia has a deemed 24.28% equity interest in the Ipoh-based company.

Hong Leong Investment Bank Bhd said the offer is generous and allows TSHT to further its global presence, especially in

Europe and North America. “Leveraging on TSHT’s dominance in China, Unisem would be able to expand its Chengdu operations more rapidly,” the research house said.

The RM3.30 per share bid is valued richly and higher than its original valuation.

Kenanga Research noted it will be a positive move as TSHT is currently the only listed company in Western China in the packaging industry.

“TSHT’s fan-out technology, which is called eSiFO, could complement Unisem’s strategy to venture into FOWLP (an enhance version of standard wafer-level packaging, using fan-out technology), beyond its niche,” it said.