AmResearch reaffirms Buy on Tanjung Offshore
AmResearch reaffirmed its BUY rating on Tanjung Offshore (Tanjung) and raised its fair value (FV) from RM1.67/share to RM2.60/share.
It said on Wednesday, Aug 18 the higher FV was based on higher forward fully diluted FY11F PE of 16x to reflect its greater conviction on the company after its visit.
“Our investment thesis centres around three themes: (1) Transformational growth from the entry of a 'well-connected' strategic investor - Ekuinas; (2) Restructuring of a loss making operation; and (3) Strong earnings upgrades from re-acceleration of domestic contracts,” it said.
AmResearch said backed by Ekuinas, Tanjung is set to further capitalise on Petronas' spending shift towards domestic capex and greater equipment localisation.
Thus far this year, Tanjung was awarded the largest offshore support vessel contracts vis-à-vis its peers.
“We are raising our estimates for FY10F-FY12F by 22% to 50% to RM44mil- RM74mil. This is to account for: (a) Expected extension to MOPU contract; (b) Order book replenishment of RM200mil-RM250mill a year for engineering equipment; and (c) Full year contributions from five new vessels delivered this year, bringing total vessels deployed to 16 in FY11F,” it said.
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