By Xavier Kong
BIMB Securities downgraded Scomi Energy Services Bhd to a “sell” rating, dropping its target price to 23 sen from a previous 27 sen, on the back of the weak results of the group.
There was an overall drop of about 24% year-on-year in revenue for Scomi Energy in its second quarter of financial year 2015 which recently ended, due to lower contributions from both the oilfield and marine services segments of the group.
“This was mainly attributed to lower activity in West Africa, Myanmar, Malaysia, and Indonesia, coupled with lower coal contracts as well as lower marine vessel utilisation numbers,” said BIMB.
Hong Leong IB (HLIB), which maintained its “hold” call as well as its target price of 25 sen, noted that Scomi Energy’s marine segment had actually doubled its losses quarter-on-quarter from RM2.7 million to RM5.7 million due to the lower utilisation.
However, this was offset by the coal segment making a better contribution.
At the same time, HLIB also noted that Scomi Energy maintains a solid balance sheet with a nett gearing of 0.2 times and a debt-to-earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio of less than two times.
“Given its strong cash flow generation with an Ebitda per annum of circa RM200 million, we do not rule out the possibility of Scomi Energy starting to pay out dividends,” said HLIB, adding that, assuming a 50% payout ratio, there is a potential dividend yield of 6.7% based on the group’s current share price.
Another concern remains the group’s order book. While Scomi Energy has been expanding into new product types other than drilling fluid to diversify its income, the group’s order book is expected to be reduced due to the weak sentiment among oil companies.
“Order book remains sizeable at RM4 billion, but we expect progressive revenue recognition from order book to slow down as oil companies are reducing capital expenditure and drilling campaigns,” noted HLIB.
As at 3pm, Scomi Energy’s shares were last traded at 26.5 sen, up 0.5 sen, on thin volume.
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