KUCHING: Tanjung Offshore Bhd (Tanjung) is facing a good year ahead with the large number of contracts flowing combined with a new order book of about RM250 million.AmResearch Sdn Bhd (AmResearch) in its research report yesterday stated that the management had been awarded a contract of RM4 million by Murphy Sarawak Oil Co Ltd. The contract was for the supply of spare parts of a gas engine generator package – for SK309-311 production operations expected to completed in six months time.
Given the size of the contract, the research house did not expect a significant impact to the group’s earnings for FY10F.
However, this was not the only job it had taken into account. Over the past few weeks, the company included a few new figures into its order book with secured contracts for the provision of wellhead maintenance services which amounted to RM70 million, long-term charter contract for its three anchor handling tug supply vessels at RM150 million and provision of glycol dehydration packages for Kinabalu field at RM25 million. These jobs were awarded by Petronas.
Other than that, Tanjung would utilise its three new AHTS vessels (Tanjung Biru 1, Tanjung Biru 3 and Tanjung Sari) for the charter contracts, added the research house.
This was part of the eight-vessel tender programme by Petronas where chartering was expected to commence in March this year. At RM150 million, this translated to an average daily rate of US$1.75/bhp for each vessel, in-line with its estimation.
However, Citech group, which had been hit by cost over-runs and LADs recently would probably affect Tanjung’s margins. It assumed an earnings before interest and tax margin of six per cent for FY10F given these concerns.
AmResearch pegged a fair value of RM1.00 per share based on Tanjung’s trading at 14 times its FY10Y earnings, a premium to sector’s average of 11 times.