Saturday, January 06, 2007

Stockwatch- Rotary Engineering, OCBC 5 Jan 2007 report up target price to 95ct

OCBC report today on Rotary, target 95ct:

Exciting times ahead

Record new contracts secured in 2006. Rotary won a new S$126m engineering, procurement and construction (EPC) project in late December 2006. We believe that this win is significant in a number of aspects: 1) the contract value is slightly bigger than Rotary's typical project size of
Revisiting our contract win assumptions. We have raised our new contract win assumptions in the FY07/08 forecast periods to S$303m per annum (vs. S$194m previously). This represents a 40% increase in new orders secured vis-à-vis in 2006, which we believe is achievable. First, Rotary has proven its ability to secure about S$200m worth of small-mid sized projects over the past two years. Second, Rotary is having a growing exposure to the overseas markets, like China and Thailand. Indeed, its two new joint ventures in Saudi Arabia have only begun to bid for contracts in 2H 2006. Third, Rotary has a strong track record in the fast expanding local market in Jurong Island. Specifically, the award of piecemeal contracts from the mega US$3b Bukom Shell Houdini project are expected to gain momentum in 1H 2007, and Rotary is one of the leading contenders.

Upward re-rating of Rotary. We believe that Rotary's share price is now poised to retest its upper historical Price to Book ratio (P/B) of 3.2x. The catalysts for a re-rating of Rotary's valuation are likely to come from the market's growing recognition of its inroads made for downstream EPC projects, and the anticipated stronger new orders flow in 2007. Rotary's share price is thus expected to move to a higher P/B trading band of 2.5x to 3.5x, as compared to the 1.5x to 2.5x historical P/B trading band in the past two and a half years.

Higher fair value. We have raised our fair value for Rotary to S$0.95 (vs. a previous post-bonus estimate of S$0.63), using a higher 3.2x P/B (vs. 2.2x previously) and on a higher revised FY07 book value forecast of S$0.30.

The implied 13.7x FY07 PER ratio is also in line with its local oil and gas peers. Maintain BUY.

1 Comments:

At 5:38 PM, Anonymous Sharetipsinfo said...

Hi,

Stock market India is volatile and all those who speculate in market are loosing everyday. Please remember stock market is not for speculation purpose. If one feel investing in stock market is gamble then its better to think again.

One should always note that if they want to invest money they should do proper research be it fundamental research or technical research. Just think how come you can invest
your money without any convincing reason for the same?

Indian stock market is one of the most happening and emerging market. Major Indian stock exchanges are BSE and NSE and both are of world class standards.

So grab good stocks and invest that’s the bottom line.

 

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