Affin Keeps Kencana Petroleum At Buy, MYR3.42 Target

STOCK CALL: Affin Investment Bank keeps Kencana Petroleum (5122.KU) at Buy with a MYR3.42 target based on 20X CY12 earnings. The house likes the stock for management's strong track record in strategic planning, project execution and clinching new contracts; "we believe the domestic and global O&G capex will remain strong over the next few years and there is currently a good demand for semi-tender rigs..." It also thinks the proposed acquisition of Allied Marine & Engineering is a positive as management is optimistic that AME will achieve, if not exceed, its profit guarantee of MYR40 per annum for FY09/11 and FY09/12; "the strategic acquisition will enable Kencana to increase its range of offshore services and evolve from a mere EPCC contractor to become a fully-integrated offshore EPCIC player. AME will also enable Kencana to establish a footprint in the subsea services and deepwater segment." The stock is flat at MYR2.79.