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.
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