MORE ACQUISITIONS: OSK Research says Kencana has taken delivery of two vessels and is looking to acquire another, which could either be a work barge or workboat to support its offshore marine support services business.
The research house added that the contract, valued at about RM10.7 million, was expected to be fully completed by the first quarter of the financial year 2011 (1QFY11).
It understood from secondary research that this oil field was discovered in 1972 and commenced production in June 1975. The field was located 45 kilometres (km) offshore the Sabah southwestern coast and northwest of Borneo Island.
OSK Research pointed out that although hook-up and commissioning services were not new to Kencana, the company decided to make further progress in this area to widen its service offering, thus making it a one-stop solution provider in the oil and gas (O&G) services.
The research house said in fact, this was the direction that not only Petronas was moving into but also by other oil majors around the world, which it
believed was due to four main reasons; the O&G sector was already an established sector and most of the supporting services companies would have the capability to do something outside their core business, it was easier to make a single party accountable for an entire project rather than dealing with a few parties, more cost savings for customers and finally, less project execution delay due to the downtime involved when switching from one contractor to another.
OSK Research stated that in the first quarter for the calendar year 2009 (1QCY09), Kencana ventured into the provision of offshore marine support services business through its two 27 per cent and 21 per cent associated companies, Teras Muhibbah Sdn Bhd (TMSB) and Malaysian Engineering & Oilfield Services Sdn Bhd (MEOSSB).
It understood that Kencana had taken delivery of two vessels and was looking to acquire another, which could either be a work barge or workboat to support this business.
There was no change to the research house’s financial year 2011 (FY11) earnings forecast for the group because the value of the contract was immaterial to Kencana, contributing less than one per cent to its FY11 forecast.
Also, the research house had earlier assumed an order book replenishment for the company based on guidance from management.
OSK Research’s target price for Kencana remained unchanged at RM2.06 per share and the stock also remained as its top pick for the O&G sector.
by Borneo Post
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