KLCI Stock - KENCANA / 5122 - 2010 Quarter 2

KENCANA PETROLEUM BERHAD

Listing Date: 15.12.2006
Market: MAIN
Sector: INDUSTRIAL
Par Value: 0.10
Major Industry: Construction
Sub Industry : Engineering & Contracting Services

KENCANA PETROLEUM BERHAD is a Malaysia-based investment holding company. The Company is engaged in providing engineering and fabrication services, as well as marine engineering and operations services businesses. Through marine engineering, it is involved in building, refurbishing, repairing and converting marine vessels. The Company provides offshore drilling services, as well as charter of vessels and rigs, through its operations service business. Its subsidiaries include Kencana HL Sdn. Bhd., Kencana Marine Sdn. Bhd., Kencana Metering Sdn. Bhd., Kencana Infrastructure Sdn. Bhd. and Kencana Steelworks Sdn. Bhd., among others. The principal activities of the subsidiaries include integrated engineering and fabrication of oil and gas production facilities and drilling rigs; operation and management of fabrication yard; metering works, process skid systems and pipeline construction, and property investment. On September 5, 2007, the Company acquired Kencana Petroleum Ventures Sdn. Bhd.

OSK Target Price: 2.04
My Target Price: 1.6+0.01=1.61 (PE 20, EPS 0.08, DPS 0.005)
My decison: NOT BUY (unless price <=1.3)
Reason: Overvalue, revenue dropped

My study based on 2010 Quarter 2 report (number in '000):-
- Compare to last year, revenue had decreased by approximately 9%, mainly due to progress achieved for contracts in hand, which was in line with the project delivery schedule. Despite the decrease in revenue, profit before tax had gone up by 19% mainly due to better management of costs resulting in better margin recorded
- Estimate next 4Q eps after 2010 Q2 result announced = 0.02*4 = 0.08, estimate PE on current price 1.53 = 19.06(DPS 0.005)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.0339*4 = 0.1356, estimate highest/lowest PE = 18.47/9.92 (DPS 0.005)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.1307, estimate highest/lowest PE = 19.09/16.03 (DPS 0.005)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.0324*4 = 0.1296, estimate highest/lowest PE = 17.32/12.77 (DPS 0.005)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.0301*4 = 0.1204, estimate highest/lowest PE = 16.07/9.34 (DPS 0.005)

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