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Wednesday, March 30, 2011

Kencana Petroleum Target Price RM3.05 by OSK Research

OSK Research is maintaining its Trading Buy on Kencana Petroleum while its target price remains unchanged at RM3.05, based on the existing PER of 23x FY12 EPS.

It said on Wednesday, March 30 that Kencana remains one of its top picks for the O&G sector with its impressive delivery track record.

Kencana's unit had secured a'' RM216 million contract from Petrofac Malaysia Ltd for the CONSTRUCTION of well head platforms for the Cendor oil field off the coast of Terengganu.

'Given that Kencana already has a tie-up with Petrofac on the Berantai field and also recently secured some jobs for the Sepat field, we are not surprised that Petrofac has again awarded to it the EPC job for the Cendor oil field, as long as Kencana has the capacity and manpower to undertake the job.

'We understand that Kencana's current utilisation rate is slightly above 60%. Also, we think Petrofac would prefer

Kencana over its other peers since the latter has worked on several projects with the multinational company and is well-versed with its requirements,' it said.

OSK Research said there was no change to its FY11-12 earnings as it had earlier assumed this orderbook replenishment for the company. This new contract will boost Kencana's orderbook to RM2.2bn, which should keep the company busy for the next 1.5 years.

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