"The fair value is based on a financial year 2010 (FY10F) forecast price earnings premium of 10 per cent to the stock's three-year average of 11 times," it said in a report.
The research house said it had marginally adjusted FY11F-FY12F earnings as contribution - from a RM131 million contract by the Malaysian government to design, construct and commission 10 units of Fast Interceptor Craft for Malaysian Maritime Enforcement Agency - has been mostly offset by its reduction in revenue estimates for the next patrol vessel package.
While the group's long-term prospects remain bright, given a potentially huge pipeline of new military contracts, AmResearch said a re-rating for the stock will only come from a significant recovery in earnings deliverance.
The stock trades at a fair FY10F's PE of 10 times, at parity to the oil and gas industry's average valuations and just below BHIC's three-year PE of 11x.
-- by Business Times
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