Petrofac Expects 15% Growth

Published in Company Comment on 18 December 2012

Impressive growth at Petrofac (LON PFC) continues.

The shares of Petrofac (LSE: PFC) climbed 10p to 1,690p during early London trading this morning after the FTSE 100 (UKX) member confirmed its 2012 profits had improved by at least 15%.

Petrofac, which designs, builds and maintains oil and gas facilities, said its operations had continued to perform in line with expectations. The firm also revealed its order backlog had advanced from $10.8bn to $11.6bn during the last twelve months.

Ayman Asfari, the group's chief executive said:

"In our Engineering, Construction, Operations & Maintenance (ECOM) division, we continue to deliver very good operational performance… We continue to experience high levels of bidding activity and we see a strong pipeline of bidding opportunities for 2013."

"We have made good progress in our Integrated Energy Services (IES) division in the year to date, securing two further production enhancement contracts in Mexico… These new awards, together with the achievement of significant milestones on our other IES projects, are helping to build long-term sustainable earnings for the Group."

Mr Asfari also said he was confident that Petrofac could achieve its target of more than doubling its recurring 2010 earnings by 2015.

Prior to today, City experts had expected Petrofac's earnings to increase by 16% to $1.85 per share for 2012, with the dividend to increase by 16% to $0.63 per share as well.

Those projections place the shares on a near-term P/E of 15 and yield of 2.3%. Given Mr Asfari appears confident of doubling profits between 2010 and 2015 -- equivalent to a compound annual growth of 15% -- the current rating does not look that expensive.

Indeed, when you also consider:

  • Net profits advanced -- without setback -- from $189m to $539m between 2007 and 2011, thereby bypassing the banking crash completely;
  • Chief executive Mr Asfari and a fellow director enjoy a combined 26% shareholding, which is currently valued around £1.5bn and suggests the board has the 'owner's eye' on proceedings, and;
  • The latest balance sheet showed net cash of $775m, which should keep any financial difficulties to a minimum were trading to experience a downturn.

...perhaps Petrofac is a share to consider for 2013.

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> Maynard does not own any share mentioned in this article.

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