Kencana able to hold its own amid competition: OSK

AS CONTRACT flows focused on rival Ramunia Holdings Bhd of late, Kencana Petroleum Bhd is still able to hold its own given its track record and large contracts to be awarded in Malaysia over the next few years, says OSK Research Sdn Bhd.Media reports recently quoted unnamed sources as saying Kencana was close to securing a charter contract from Petroliam Nasional Bhd (Petronas) for its first tender drilling rig.The sources stated that it could announce the contract by late February this year."Based on our recent meeting with management, this is a possibility although March would seem a more likely date. Kencana would then begin the fabrication of its second rig once the charter contract for the first one is secured," OSK Research senior vice-president Chris Eng wrote in a report yesterday.Kencana remains confident of securing two charters, although the competition is increasing due to a recent slide in day rates for jack-up rigs."We are, however, paring down earnings estimates from rig fabrication as Kencana will only book in 75 per cent of the total contract as it owns 25 per cent of the rigs it fabricates," said Eng."Although Kencana's outstanding order book has slid to RM1.4 billion from RM1.8 billion previously, replenishment is happening via small-process equipment contracts currently."The RM7 billion to RM10 billion platform contracts to be awarded over the next few years should also keep every fabrication yard in Malaysia busy," he added, maintaining a "trading buy" call on Kencana with a RM2.99 price target. -www.btimes.com.my