Stock Name: KENCANA
Company Name: KENCANA PETROLEUM BHD
Research House: AMMB
Kencana Petroleum Bhd
(April 27, RM2.69)
Recommend buy at RM2.68 with fair value of RM3.40: Kencana Petroleum has secured a RM208 million contract from Kebabangan Petroleum Operating Company Sdn Bhd (KPOC) to fabricate the Kebabangan substructure for the Kebabangan northern hub development project off the coast of Sabah.
This one-off contract, expected to be delivered to KPOC by 3QCY12, involves the construction, engineering, procurement, fabrication, inspection, testing and commissioning, loadout and sea-fastening (EPC) of the KBB substructure.
As highlighted in our earlier reports, this contract was expected and signals the start of additional new jobs from the Kebabangan deepwater cluster.
Recall that Sime Darby Engineering Bhd secured the RM1.2 billion EPC job to fabricate the KBB topsides for this field on Monday.
As we had highlighted in our report on Tuesday, we expected additional works to be awarded from this massive contract, which involves a huge 14,000-tonne jacket. Note that KPOC has yet to award the EPC job for the jacket.
We understand that Kencana had been tendering for up to RM1 billion of works in the Kebabangan cluster, which did not include the recent EPC job secured by Sime. Recall that the KBB facility comprises a single integrated drilling, oil and gas production, utilities and quarters (PDUQ) topsides mounted on a fixed eight-leg jacket in 142m of water.
The Shell-operated Malikai deepwater field will be tied in via separate partially-stabilised liquid and dry gas lines shortly after first gas from Kebabangan.
Since the beginning of the year, Kencana has secured RM739 million of fresh contracts, including an estimated RM200 million EPC works for the Berantai marginal field ' in which the group has a 25% stake in the risk-sharing contract.
This represents 37% of the group's targeted new orders worth up to RM2 billion for this year.
Kencana's FY11F/13F earnings are maintained as we had already incorporated new order assumptions of RM1.5 billion to RM1.8 billion for FY11F/13F.
The stock currently trades at an attractive CY11F price-earnings ratio of 21 times, below its 2007 peak of 25 times.
Hence, we maintain our 'buy' call on Kencana, with an unchanged fair value of RM3.40 pegged to an FY12 PER of 22 times.
But our preferred exposure to the oil and gas sector remains Malaysia Marine & Heavy Engineering Holdings given its stronger order news flow, management revamp and radical margin-rating prospects. ' AmResearch, April 27
This article appeared in The Edge Financial Daily, April 28, 2011.
Company Name: KENCANA PETROLEUM BHD
Research House: AMMB
Kencana Petroleum Bhd
(April 27, RM2.69)
Recommend buy at RM2.68 with fair value of RM3.40: Kencana Petroleum has secured a RM208 million contract from Kebabangan Petroleum Operating Company Sdn Bhd (KPOC) to fabricate the Kebabangan substructure for the Kebabangan northern hub development project off the coast of Sabah.
This one-off contract, expected to be delivered to KPOC by 3QCY12, involves the construction, engineering, procurement, fabrication, inspection, testing and commissioning, loadout and sea-fastening (EPC) of the KBB substructure.
As highlighted in our earlier reports, this contract was expected and signals the start of additional new jobs from the Kebabangan deepwater cluster.
Recall that Sime Darby Engineering Bhd secured the RM1.2 billion EPC job to fabricate the KBB topsides for this field on Monday.
As we had highlighted in our report on Tuesday, we expected additional works to be awarded from this massive contract, which involves a huge 14,000-tonne jacket. Note that KPOC has yet to award the EPC job for the jacket.
We understand that Kencana had been tendering for up to RM1 billion of works in the Kebabangan cluster, which did not include the recent EPC job secured by Sime. Recall that the KBB facility comprises a single integrated drilling, oil and gas production, utilities and quarters (PDUQ) topsides mounted on a fixed eight-leg jacket in 142m of water.
The Shell-operated Malikai deepwater field will be tied in via separate partially-stabilised liquid and dry gas lines shortly after first gas from Kebabangan.
Since the beginning of the year, Kencana has secured RM739 million of fresh contracts, including an estimated RM200 million EPC works for the Berantai marginal field ' in which the group has a 25% stake in the risk-sharing contract.
This represents 37% of the group's targeted new orders worth up to RM2 billion for this year.
Kencana's FY11F/13F earnings are maintained as we had already incorporated new order assumptions of RM1.5 billion to RM1.8 billion for FY11F/13F.
The stock currently trades at an attractive CY11F price-earnings ratio of 21 times, below its 2007 peak of 25 times.
Hence, we maintain our 'buy' call on Kencana, with an unchanged fair value of RM3.40 pegged to an FY12 PER of 22 times.
But our preferred exposure to the oil and gas sector remains Malaysia Marine & Heavy Engineering Holdings given its stronger order news flow, management revamp and radical margin-rating prospects. ' AmResearch, April 27
This article appeared in The Edge Financial Daily, April 28, 2011.
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