Gamuda Bhd - Maintain outperform with higher target price RM4.96

Gamuda's FY7/10 core net profit made up 91% of our full-year forecast and 83% of consensus. Despite an improved earnings before interest and tax (Ebit) margin, which anchored the 45% year-on-year (y-o-y) growth in net profit, the results were below expectations as we had overestimated associates' contributions. We cut our FY2011/12 forecasts by 4% to 6% and introduce our FY2013 numbers.

This, plus the effects of rolling forward our valuation horizon to end-2011 and applying our revised 13.8 times target market PER (15 times previously) to our construction profit component raises our RNAV-based target price from RM4.78 to RM4.96.

We reiterate our 'outperform' call with main potential re-rating catalysts being more progress and eventual approval of the MRT project. The stock remains one of our top picks for the sector.

FY2010 revenue dipped 10% y-o-y, mainly due to depleting construction jobs and despite strong property sales of RM820 million, surpassing the targeted RM800 million. However, Ebit surged 49% y-o-y while Ebit margin expanded almost two percentage points to 8.9%, boosted by all segments. At the pre-tax profit level, the construction division chalked up a y-o-y doubling of pre-tax profit and contributed 21% of group pre-tax profit. Construction pre-tax margins stood at 4.5%, and are likely to further improve in the coming quarters. Pre-tax profit from the property, expressways, and water segments grew by 15% to 28% y-o-y and accounted for 78% of group pre-tax profit. Overall core net profit grew by 45% y-o-y. No dividends were declared, which was no surprise.

During the results briefing, management sounded more optimistic about the progress of the MRT proposal, reinforced by the key deliverables of the Economic Transformation Programme (ETP). The MRT proposal is still at the consultants' evaluation stage, which is expected to be completed by end-September. Management expects more details to be unveiled during the tabling of Budget 2011 on Oct 15, with likely Cabinet approval before end-2010. Clinching the RM13 billion to RM14 billion tunnelling works would bump up the current RM6 billion outstanding order book to over RM12 billion. ' CIMB Research, Sept 29.

This article appeared in The Edge Financial Daily, September 30, 2010.

E&O poised for next cycle of growth

MAIN market-listed Eastern and Oriental Bhd is well prepared and poised for its next cycle of growth after having achieved robust profits, increased revenue aand record sales, said Executive Director Eric Chan Kok Leong.

He said the financial year ended March 31, 2010 saw a remarkable turnaround in performance with the group returning to the black with a profit-after-tax of RM74.4 million against an after-tax loss of RM32.10 million recorded in the previous financial year.

The group continued to achieve a solid performance in the first-quarter of the current financial year ending March 31, 2011 with profit-after-tax increasing to RM12.1 million, up from RM5.7 million registered in the same period last year.

'The group's cash and gearing positions are very healthy at half a billion ringgit,' he told reporters in Kuala Lumpur today after the company's annual general meeting.

Chan said property development projects would contribute a major portion of its group revenue in years to come.

The company is also involved in two other core business activities of property investment and, hospitality and lifestyle.

He added with EandO's brand presence and balance sheet strength, the company would concentrate on the execution of eight projects and the development of its 520 hectares of prime landbank collectively amounting to RM4 billion in gross development value.

Chan also said this would include the construction of two recently-launched projects namely St Mary's Residences in Kuala Lumpur and Quayside Seafront Resort condominiums in Seri Tanjung Pinang, Penang.

Four projects, worth RM2 billion, would be located in Penang and the rest in the Klang Valley.

Chan said the company would remain focused on developing properties in the prime areas of the Klang Valley and Penang as regional markets were not the company's top priority for now. - BERNAMA

Bursa Malaysia: HWangDBS expected Gamuda FY10 to beat they forecast

Author: Durian Edge Publish date: Mon, 27 Sep 11:37

Earnings to beat expectations

•FY10 result expected to beat our forecast
•Still bidding for MRT, LRT and Qatar jobs
•BUY, raised TP to RM4.40

FY10 to beat forecast. Gamuda's full year result due 28 September will likely beat our FY10F net profit of RM270m by 5-10%; our estimate is at the low end of consensus forecasts. 4QFY10 net profit should exceed 3QFY10's RM73m to register the fourth consecutive quarter of growth. This would be driven by continued improvement in construction margins q-o-q (average of 1ppt) and RM600m unbilled sales. FY10 property sales was a record RM800m (vs RM500m in FY09) and the momentum has carried over to the first 2 months of FY11. Gamuda is guiding for RM880m local property sales for FY11 and RM820m from Vietnam. There is a risk it might not meet the Vietnam forecast because Yenso Park has not received the residential land parcel titles. But we take comfort that the market has yet to factor in any sales.

MRT and other projects. The next milestone for the RM36bn MRT project is the result of two independent consultants' report by end-September - we understand the feedback had been positive. We remain convinced this project will take off (See sector report dated 3 September).
The key risk for the MMC-Gamuda JV is the presence of foreign contractors if the tunneling portion is awarded under Swiss Challenge method. But foreigners are unlikely to be able to match the cost structure of locals, with the double tracking project setting a precedent. A realistic start date will be in mid-2011 where the tunneling portion will be part of Phase 1 (2011-2016) with the project reaching 70% completion. Other projects in the pipeline are the LRT extensions where Gamuda submitted a bid, LCCT runway and RM1.5bn Durkhan highway in Qatar.

BUY, raising TP to RM4.40. Gamuda remains our high conviction pick. We raised our TP to RM4.40 after factoring in the recent purchase of land along Jalan Pudu (RM600m GDV), where Gamuda plans to build shop offices and service apartments. At 19x 1-year forward PE and 2.1x
P/BV, valuations do not seem cheap, but they are at mean levels. We expect valuations to at least test 1SD above mean and for it to trade at premium valuations to its peers should it be awarded the MRT project. In the 2-months leading to the award of its RM12.5bn double tracking project, it traded at average 1-year forward PE of 29x and peaked at 39x a month later. Gamuda's investability will also gain traction having replaced Tanjong in the FBMKLCI.

Report by
HWANGDBS Vickers Research Sdn Bhd (128540 U)

Evergreen Fibreboard - A Triple Digit Leap

OSK - On an annualised basis, Evergreen Fibreboard’s (EFB) earnings beat our and consensus estimates. However, in being conservative, we are retaining our earnings estimates and maintain the stock’s target price at RM2.63, with its BUY recommendation intact. We also note that EFB has declared a second interim tax exempt dividend of 2 sen per share, which brings its total payout YTD to 4 sen per share, accounting for 55.5% of our full-year estimate of 7.2 sen per share.

Maintain BUY. We are keeping our BUY recommendation for EFB as its fundamentals remain intact. Our target price is maintained at RM2.63, derived from pegging its FY11 EPS at 26.3 sen and ascribing to the stock a higher tier building material PE of 10x.

Study on MRT to be completed early October

TECHNICAL study on the proposed mass rapid transit (MRT) project, conducted by the Land Public Transport Commission (LPTC) and a consultant appointed by the Ministry of Finance, will be completed by early October.

LPTC said a report on the technical study will be presented to the Steering Committee on the Klang Valley Integrated Transportation System headed by the Secretary-General of the Treasury.

A paper on the proposal is expected to be drawn up and tabled in Cabinet soon after that, LPTC said in a statement yesterday.

The proposed MRT system, consisting three lines running a total of 150km and covering an area within a 20km radius of central Kuala Lumpur, was initiated by a joint venture between MMC Corp Bhd and Gamuda Bhd earlier this year.

The proposed project is valued at RM36 billion, excluding the cost of land acquisition and rolling stock.

The three-month technical study on the proposal, carried out by LPTC and consultant Minconsult Sdn Bhd, began on July 1 this year.

"The technical study covers an appraisal by the two parties on the viability of the proposal. Among the areas covered were the corridor and alignment, engineering, environmental and social impacts and others," LPTC chief executive officer Mohd Nur Ismal Mohamed Kamal said in the statement.

He stressed that LPTC's key objective is to ensure the MRT project will meet the needs of the people in order to encourage increased usage of public transport.

When the technical study is completed, a further assessment called the Value Management Study (VMS) will be conducted by LPTC and the Economic Planning Unit.

The second study is required as a project of such magnitude will need early identification of opportunities to ensure its sustainability, LPTC said.

A VMS is a common approach practised globally, especially on projects that require optimisation of the funding mechanism and prudent spending.

In other words, the VMS will ensure that the MRT project is economically sustainable and optimises government spending whilst promoting public interest as its priority.

Read more: Study on MRT to be completed early October

Infrastructure players ride high on ETP hopes

Written by Surin Murugiah Wednesday, 22 September 2010 13:21


KUALA LUMPUR: Infrastructure players including Gamuda, MMC Corp, YTL Corp advanced on Wednesday, Sept 22 on expectations they would take the lead in infrastructure projects to be implemented under the Economic Transformation Programme (ETP).

The FBM KLCI rose 1.25 points to 1,477.24 at midday, lifted by gains including Gamuda, YTL Corp, Genting and MMC Corp. Gainers led losers by 347 to 299, while 270 counters traded unchanged. Volume was 789.55 million shares valued at RM1.01 billion.

Gamuda shares, call warrants and warrants totalled 81.71 million units, accounting for 10.35% of total trading volume.

.......................

OSK Research said key players involved in infrastructure development are expected to benefit from the implementation of the ETP, including the RM36 billion KL mass rapid transit (MRT) which features in the Greater Kuala Lumpur plan. They include Gamuda and MMC Corp (TRADING BUY, FV: RM2.59) for the MRT and MRCB, which may be involved in land development around KL.

Gamuda added 19 sen to RM3.94, Gamuda-WD gained 13 sen to RM1.38 and Gamuda-CM 6.5 sen to 24 sen on hopes of taking the lead in the MRT project in Kuala Lumpur. MMC Corp was up 13 sen to RM2.91 and MRCB up four sen to RM2.04.

Among the major gainers YTL Corp rose 22 sen to RM7.81 on hopes of the high speed rail link from Kuala Lumpur to Singapore.

Tradewinds added 23 sen to RM4.17, Lion Forest Industries and Wah Seong rose 19 sen each to RM1.86 and RM2.27,Genting rose eight sen to RM10.44, , Bursa up 30 sen to RM8.

Plenitude up 15 sen to RM4.89, SHL Consolidated up 13 sen to RM1.24 and E&O added nine sen to RM1.23.

Among the losers, Far East Holdings fell 38 sen to RM6.50, Tasek down 26 sen to RM6.62, Masterskill fell 20 sen to RM3.20, Top Glove lost 16 sen to RM5.39, DFZ Capital down 15 sen to RM3.60, Mudajaya fell 13 sen to RM4.25 while Boustead lost 12 sen to RM4.45.

The actives included Genting Malaysia call warrants, Gamuda call warrants, KNM, Zelan, E&O and Karambunai. Karambunai surged 36% to 7.5 sen in the morning session on a news portal report about an integrated resort in Sabah.

Economic Transformation Programme: Roadmap to high-income nation

Written by Chan Kok Leong Wednesday, 22 September 2010 15:40

KUALA LUMPUR: The government has announced the Economic Transformation Programme (ETP) to realise Malaysia’s ambition to turn the country into a high-income economy by 2020.

Minister in the Prime Minister’s Department, Senator Datuk Seri Idris Jala told a hall packed with some 3,000-odd corporate figures and business leaders yesterday that the ETP will help Malaysia triple its Gross National Income (GNI) from RM660 billion (2009) to RM1.7 trillion in 2020.

This translates to an increase of GNI per capita income from RM20,770 (US$6,700) to at least RM46,500 (US$15,000), meeting the World Bank’s high-income benchmark. To help achieve this, the government aims to sustain 6% GNI growth between 2011 and 2020.

On top of that grand aspiration, the government is confident that the private sector will be the primary driver for the push towards a high-income nation.

A total funding of over RM1.4 trillion is required for the duration of this economic push, with 92% of the funding expected to come from domestic investments and public funding expected to take up the remainder.

In his presentation, non government-linked companies (GLCs) are expected to fund 60% or RM824 billion with GLCs funding 32% or RM446 billion. Public spending is estimated to be around RM105 billion.

According to Idris, the targeted 60% private sector funding will be a significant increase from 37% in 2008, and is consistent with the 12.8% per annum private investment growth noted in the 10th Malaysia Plan.

During his hour-long presentation, it was noted that the total private investment from 2005 to 2010 was RM410 billion or an average of RM68 billion per annum.

“Malaysia needs to increase this average annual private investment level in the next 10 years by about 60% more than historical average to around RM120 billion per annum for 2011-2020,” said Idris.

Private investment-led growth will cut government funding, which is constrained by the need to improve the nation’s fiscal position, said Idris.

“As such, government funding will be targeted at initiatives that will maximise GNI impact for every ringgit of public money spent, with heavier emphasis on development expenditure over operational expenditure,” said the former Malaysian Airlines Bhd CEO.

“Malaysia has no time to lose. We need a complete, radical economic transformation. The days of depending on traditional growth engines are over. If we continue on the current model, we risk getting stuck in middle-income trap and lose out on talents necessary to support a high-income economy,” he added.

This article appeared in The Edge Financial Daily, September 22, 2010.

DRB Hicom upbeat on financial results

Automotive based group DRB Hicom Bhd is confident of surpassing last year's operating profit of RM457 million in the current financial year ending March 2011.

It said the projection was based on the positive performance in the first quarter ended June 30, 2010 and the much-improved results of its subsidiaries and its continuing group-wide efforts to improve.

Group managing director Datuk Seri Mohd Khamil Jamil said the pre-tax profit for the first quarter ended June 30, 2010, was a 157 per cent jump at RM223.475 million compared with RM86.988 million in the same quarter of 2009.

DRB Hicom also recorded its highest ever operating profit of RM457 million for the financial year ended March 31, 2010 while profit before tax was at RM657 million.


"We are trying to rationalise between automotive and other businesses because automotive is a very volatile business and the margins are very low," he told reporters after its 20th Annual General Meeting in Shah Alam today.

Despite the difficult operating environment, the group managed to grow its businesses especially in the services sector with a 3.5 per cent increase in revenue to RM6.31 billion from RM6.1 billion in the previous financial year.

Meanwhile, Mohd Khamil said the company was also looking at new joint ventures with another automotive company in Asia and hoped to finalise it soon.

"We are now negotiating with the company and we have done a lot of feasibility studies and costing," he said, adding that some details were being looked into now.

On the possibility of Proton acquisition, he said for now the company was focusing on Volkswagen and UK-based POTENZA Sports Cars Ltd to develop its automotive sector.

"Proton is being very well managed by its current management under Datuk Syed Zainal," he said.

"Whether we acquire Proton or not we will always work together as we are one of the main vendors and suppliers to Proton parts and components, and a retailer," he added.

On Bank Muamalat disposal, the company has written in to Bank Negara to ask for an extension on the period for the divestment of its 30 per cent interest in Bank Muamalat.

Would be potential acquirers of the equity have been slowed down by the economic slowdown, he said, adding that the bank was looking at a strategic partner who can also bring their management, products and technical expertise.--Bernama

Read more: DRB Hicom upbeat on financial results

DRB-Hicom Official: Expect To Sign Assembly Pact With Volkswagen By Year End

KUALA LUMPUR (Dow Jones)--DRB-Hicom Bhd (1619.KU) expects to sign a definitive agreement with German auto maker Volkswagen AG (VOW.XE) for the assembly of Volkswagen vehicles in Malaysia by the end of the year, DRB-Hicom Managing Director Mohd. Khamil Jamil said Wednesday.

"We hope to conclude the agreement by year end and the first rollout may be towards the end of 2011," Khamil said at a news conference after the company's general meeting.

DRB-Hicom aims to have an annual production capacity of 30,000 Volksawgen units by 2015, he added. DRB-Hicom is one of Malaysia's largest car distributors and importers.

Khamil also said the automotive division of the diversified group will likely be a driver for both revenue and earnings in fiscal year 2011 beyond. "We are looking at another Asian automaker and are quite close to an agreement," he said, but didn't provide further details.

-By K.P. Lee; Dow Jones Newswires; 603-2026-1233; ankur.relia@dowjones.com

ADVENTA (TP RM3.73– BUY) - OSK

9MFY10 Results Preview: Hurt By External Factors

Adventa is expected to announce its 9MFY10 results later this month, which we think may come in below consensus and our expectations given that latex prices stayed at a high of about RM7.00/kg, and the USD continued to weaken against the MYR. However, we believe 4QFY10 would be a better quarter since the company will have additional capacity from its new nitrile glove lines. We are tweaking our FY10-11 earnings downward by 8%-13%. Maintain Buy, but at a lower target price of RM3.73.

Bina Puri to take 80% stake in RM500m Medini project

Written by Joseph Chin Tuesday, 07 September 2010 18:43

KUALA LUMPUR: BINA PURI HOLDINGS BHD [] is teaming up with Medini Land Sdn Bhd to develop 1.048 million sq ft gross floor area in Medini North, the first phase of Medini Iskandar Malaysia.

“The development will have a gross development value of approximately RM500 million upon completion of the two-phase development in Johor,” it said.

Bina Puri will have an 80% stake in the development of the project which is expected to be completed in 2012.

Extracted from...

MMCCORP - Winds of Change

Initiate coverage with buy call at RM2.53 and target price RM3.20

MMC, an integrated utilities and infrastructure player, is strongly leveraged on Malaysia's improving economy (1H2010 GDP 9.5% year-on-year). For example, container volume at PTP and Johor Port are up 13% and 5% y-o-y for year-to-date June, passenger traffic at Senai airport is resilient at 1.4 million, Malakoff IPP's average despatch factor is 50% (against 49% in 4Q2009) and Gas Malaysia's volume is up 14% for 1H2010.

The company is a strong proxy to Iskandar Malaysia, which makes up an estimated 68% of MMC's sum-of-parts (SOP) value. It owns two ports ' PTP and Johor Port, the only airport, located in Senai, 16 water treatment plants, and a landbank of 4,296 acres. Completion of key infrastructure projects by 2012, such as Legoland, the Newcastle University Medicine Malaysia Campus in EduCity and Marlborough College will yield steep appreciation potential in land values. We estimate every RM5 psf rise in land value will raise our SOP valuation by 8%. Recent transactions by EQ solar and MOX valued raw land at RM25 psf with infrastructure. Improving relations between Singapore and Malaysia could also offer substantial development opportunities, such as a rapid transit system between Tanjung Puteri in JB and Singapore, bullet train and/or a third link to Singapore. This will see land values reflate.

Alternative proxy to MRT. Key to its construction arm will be the MMC-Gamuda JV bid for RM36 billion MRT project in Kuala Lumpur.

If it comes to fruition its order book will triple and add another 17 sen per share to its SOP. Other potential projects include other road-based projects and replicating the SMART tunnel in other states. We assume every RM1 billion increase in new order wins will raise our SOP valuation by 4%. It is the only construction-related stock included in the KLCI FBM 30 and should command some IPP premium with the delisting of Tanjong. ' HwangDBS Vickers Research, Sept 2

This article appeared in The Edge Financial Daily, September 3 2010.

Taiwan PC Makers Post Profit Rises

By LORRAINE LUK And TING-I TSAI

TAIPEI—Taiwan's major personal-computer makers—Acer Inc., Compal Electronics Inc. and Quanta Computer Inc.—reported rises in second-quarter net profit, helped by a recovery in demand for electronic products.

But Quanta offered a cautious outlook for the second half, in an indication that growth may be slowing due to economic uncertainties in the U.S. and Europe.

Analysts say that PC manufacturers' profit margins continue to be pressured by their growing exposure to low-cost products such as netbooks—laptops that can conduct basic Internet and computing functions—and rising price competition from rivals. Quanta President C.C. Leung said increasing competition will continue to pressure the company's gross margin for the remainder of this year and next year.

Market research firm Gartner on Tuesday reduced its forecast for PC shipment growth in the second half by about two percentage points to 15.3% due to the uncertain economic outlook in the U.S. and Western Europe. But for the full year, Gartner expects world-wide PC shipments to rise 19% to 367.8 million units from 308.3 million units in 2009.

"The slow pace of economic recovery and austerity measures in Europe have made PC suppliers very cautious in 2010. However, consumer demand is likely to remain strong even if the economic recovery stalls because consumers now view the PC as a relative 'necessity' rather than a 'luxury' and will continue to spend on PCs, even at the expense of other consumer electronic devices," said Ranjit Atwal, research director at Gartner.

Acer, the world's second largest personal-computer maker by shipments after Hewlett-Packard Co., said its audited net profit for the three months ended June 30 rose 55% to 3.6 billion New Taiwan dollars (US$112.4 million) from NT$2.3 billion a year earlier. Revenue rose 26% to NT$150.3 billion from NT$119.1 billion.

Quanta, the world's largest contract maker of notebook PCs by revenue, said its net profit for the three months ended June 30 rose 4% to NT$5.1 billion (US$159.4 million), or NT$1.35 a share, from NT$4.9 billion, or NT$1.34 a share, a year earlier. But the result fell short of analysts' expectations of NT$5.3 billion. Consolidated revenue in the second quarter rose 63% to NT$295 billion from NT$181.1 billion.

Quanta said it expects shipments in the third quarter to be flat or drop slightly from the 13.7 million units it shipped in the previous three months because of softening demand from developed markets such as Europe and the U.S. But the company maintained its target of growing its full-year shipment by 40% to 50 million laptops this year.

"We will improve our cost structure and ramp up our revenue from non-notebook products such as mobile computing devices to mitigate the gross margin pressure," said Chief Financial Executive Elton Yang at a press briefing.

Quanta said its second-quarter gross margin fell sharply to 3.4% from 6.2% a year earlier due to rising component costs and higher marketing expenses for new products.

Compal Electronics, the world's second-largest contract maker of notebook computers by revenue after Quanta Computer, said its second-quarter net profit nearly doubled from a year earlier due to strong demand for notebook computers. Compal reported a net profit of NT$6.44 billion (US$200.9 million) for the three months ended June 30, up from NT$3.24 billion a year earlier and beating analysts' expectations. Revenue rose 78% to NT$217.06 billion from NT$121.90 billion a year earlier.

Write to Lorraine Luk at lorraine.luk@dowjones.com

Read more...

HDBSVR: RM36b mass rapid transit to transform local construction landscape

Written by HwangDBS Vickers Research Friday, 03 September 2010 14:17

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) expects the RM36-billion mass rapid transit (MRT) to drive the CONSTRUCTION [] sector, once it is approved and takes off.

The research house said the probability of it being approved is high as the recent subsidy cuts suggest political will.

A key turning point could be the outcome of two consultant studies in mid-September. This project could see Gamuda’s orderbook double and MMC’s triple, but all contractors will benefit given its sheer size.

“In terms of sum-of-parts accretion, we expect additional 26 sen per share for Gamuda and 17 sen for MMC. The MRT project also ties in with another anchor market theme – government land sales. We expect MRCB’s participation in the 3,400-acre RRIM land to give it pricing power beyond our assumption of RM300 psf,” it said.

Hwang DBS Vickers Research said the 10th Malaysia Plan (10MP) tabled in June 2010 has at least set the foundation for the rollout of key projects.

“There is emphasis on upgrading the country’s transportation system with projects including seven new highways, LRT extensions, MRT and southern double tracking worth a total of RM71 billion.

“A total of 52 public-private projects (PPP) worth RM62.7bn were also identified. There is also a RM20 billion fund established to facilitate private sector investments in projects with high strategic value and multiplier effects,” it said.

HDBSVR said the sector will ultimately be driven by newsflow, but it expects more emphasis on margin recovery to monitor execution risks.

The research house expects stronger margin recovery in 2HCY10, and normalising to 9-10% in FY11; IJM is a candidate with zero legacy jobs in its orderbook currently.

From January 2007 to September 2008 – about when 9MP projects were rolled out - the KL Construction Index traded up to 24 times price-to-earnings and 2.2 times price/net tangible asset (+2SD above mean) vs mean valuations now.

“And in anticipation of more aggressive rollout of high multiplier projects, the KL Construction Index has room to trade higher and possibly test 2007/2008 highs,” it said.

HDBSVR said its high conviction picks for the sector are Gamuda and MRCB – the two largest beneficiaries of the MRT project. Its recent initiation on MMC is also an alternative MRT proxy.

“We are also positive on Gamuda’s Vietnam project that is slated for maiden launch in October. Our other BUYs are IJM as the safest proxy to the sector given its diversified earnings base and strategy to bid for a large pool of contracts, while WCT remains the proxy most leveraged to the sector. Our small cap value pick is Sunway which is trading at only 10 times CY11 EPS and will post record FY10 earnings,” it said.

Source...

Kencana Petroleum: Maintain Buy, target price RM2.06

OSK Research's target price for Kencana Petroleum Bhd (5122) remains unchanged at RM2.06 based on a calendarised price earnings ratio of 16 times financial year 2011 earnings per share.

Maintaining its "Buy" call on the stock, the research house said the company remains its top pick for the oil and gas sector.

"We like its strong delivery track record, which we think puts it in a position to benefit from new fabrication jobs from Petronas and its production-sharing companies (PSC) contractors," OSK said.

It said, currently, they believe both Kencana's order book and tender book stand at RM1.6 billion and RM2 billion respectively.

On Wednesday, Kencana announced that its fully-owned subsidiary Kencana HL Sdn Bhd received two hook-up and commissioning work orders from PSCs.
The contracts, valued at RM32 million in total, are expected to be completed by the middle of 2011.

"We see jobs trickling in. Although the amount is immaterial, making up only about 1 per cent to 2 per cent of its total revenue, Kencana is gradually receiving more new jobs, either from Petronas, its PSC contractors or other oil majors from around the globe.

In the local oil and gas market, OSK said it believes Petronas and its PSC contractors will continue awarding more jobs, especially in the brownfield services segment, to give an immediate boost to the country's oil and gas production.

"We guess the targeted field would be Tapis oilfield as we gather from our sources that this oilfield still contributes about one-third of Malaysia's total oil and gas production," OSK said.

Read more...

SapuraCrest: Buy, target price RM3.12

AMRESEARCH Sdn Bhd reiterated its "Buy" call on SapuraCrest Petroleum Bhd (8575)with an unchanged fair value of RM3.12 per share based on a 2010 forecast price earnings of 22 times.

The research house said the company remains the top pick in the oil and gas sector given its dominant position in Malaysia's pipe-laying/off shore installation services and tender rig market.

"SapuraCrest also has a huge order book of RM10 billion, the largest among locally listed stocks," it said.

However, including the full five-year Pan Malaysian pipe-laying contract, its gross order book is even larger at RM13 billion, with a sizeable oil and gas asset ownership.
At present, it has a substantial seadrill equity participation of 24 per cent and strong earnings forecasts from financial year 2009 to 2013 with a compound annual growth rate of 24 per cent.

"Hence, we maintain financial year 2011 forecast to financial year 2013 forecast earnings for now, which project annual earnings growth of up to 19 per cent, underpinned by the group's RM10 billion order book," it added.

AmResearch said the stock currently trades at an attractive 2010 forecast price earnings of 13 times, compared to over 25 times registered by SapuraCrest and Wah Seong back in 2007.

Read more...

Real Men Go to a Hotel With Virtual Girlfriends