by winston » Thu Nov 05, 2009 8:50 pm
Not vested. From CIMB:-
Rotary Engineering (S$1.02) - 3Q09 results - Expect stronger 4Q
Results met expectations; maintain Outperform. Although 3Q09 net profit of S$11m
(+11% yoy) forms only 22% of our FY09 forecast and 23% of consensus, we consider the
results to be in line as we are expecting a much better 4Q09 from higher recognition of
contracts.
9M09 net profit forms 56% of our full-year forecast. Our earnings estimates are unchanged. Our target price of S$1.92, still based on 11x CY11 P/E, in line with its 5-year average. Further margin expansion, order wins in the Middle East, and projects in ASEAN are expected to provide mid-term catalysts.
Dip in revenue. 3Q09 revenue was S$109m, down 8% yoy, as fewer project milestones were reached in the quarter and new contracts have yet to generate material revenue. Revenue from the Jubail (SATORP) refinery project in Saudi Arabia is expected to come through in 4Q09.
Improved gross margins. 3Q09 gross margins of 25% were much higher than our estimate of 23%, aided by cost savings realised at the end of projects. Management maintains its guidance of 18-22% for gross margins but we expect positive surprises in 4Q09.
Update on SATORP. Currently, 18% of SATORP’s engineering phase has been completed. Completion of the entire engineering phase is expected in 2Q10, and construction should start in 2H10. Procurement of materials is underway, and is expected to stretch over the entire project.
Order book at record S$1.4bn; strong tendering in Middle East and ASEAN. Rotary will be tendering for EPC jobs for the Wasea plant and Yanbu project in Saudi Arabia (US$10bn) in 4Q09 and 1Q10 respectively.
Contract awards for Yanbu are expected in 2Q10.
Any contracts secured from Yanbu will likely contribute from 2011. We believe Rotary has the capacity to take on an additional S$1bn of EPC work. The S$105m contracts it has secured within ASEAN from Jul 09 indicate a revival of petrochemical and oil & gas spending.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"