| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM2.21 (+81.1%) |
| Last Traded | RM1.22 |
| Recommendation |
A recent long-term contract win with Petróleos Mexicanos (Pemex) for gas processing in Mexico is set to significantly bolster the capabilities and long-term outlook for a key player in the oil and gas sector. The agreement, encompassing both engineering, procurement, and construction (EPC) and extensive service provisions, underscores a strategic expansion into critical gas infrastructure.
Contract Details and Strategic Impact
The contract focuses on the Ixachi gas field and includes the development of new gas processing facilities, notably a second gas sweetening plant and associated separation infrastructure. Crucially, beyond the initial construction phase, the company will provide gas sweetening services under a long-term agreement stretching until 2035. This extended tenure is expected to provide substantial operational visibility and revenue stability for the company’s gas processing segment. The contract award formalizes and de-risks previously indicated capacity expansion plans, while solidifying operational presence in the Ixachi field.
Analysts view this contract award as a highly positive strategic move, strengthening the company’s gas processing platform in Mexico by adding 150 million standard cubic feet per day (mmscfd) of gas sweetening capacity. The combination of initial EPC works followed by long-tenure services is anticipated to create a more balanced earnings mix, with the services component delivering higher-quality and stable cash flows post-commissioning. This reinforces the company’s strategic focus on gas processing rather than signaling a shift in business direction.
Future Outlook and Recommendation
Despite the significant contract development, the investment bank has opted to maintain its existing earnings forecasts at this juncture, pending further clarity expected from an upcoming analyst briefing. Consequently, the target price for the company’s shares remains unchanged at RM2.21 per share, derived from a sum-of-parts (SOP) valuation. The bank reiterates its “BUY” recommendation, reflecting confidence in the company’s strengthened strategic position and long-term prospects.
