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A CONTINUING flow of high value-added contracts has prompted analysts to re-rate Rotary Engineering, driving its stock to a year-high yesterday.
Rotary said on Wednesday night that it had clinched two more deals worth a total of $84 million.
The first, worth $48 million, is from PTT Tank Terminal Company in Thailand to build an ammonia storage tank and facilities at the Map Ta Phut petrochemical hub in Rayong Province. The second, involving two contracts worth a combined $36 million, is for work on Neste Oil Singapore's $1.2 billion renewable diesel plant in Tuas.
The latest wins come two weeks after Rotary announced a US$745 million tank farm project in Jubail, Saudi Arabia.
Analysts say that the latest wins have lifted Rotary's order book past $1.52 billion - a record.
The recent deals mark a coming of age for a company which, until now, has been largely confined to building tank farms at Jurong Island and Tuas. Analysts say that the market for projects, particularly in Malaysia and Indonesia, is hotting up.
'The recent award of a US$10 billion contract at the Merapoh Resources refinery project in Kedah to South Korea's SK Group is a positive sign,' said CIMB Securities. 'Malaysia also has a US$4.6 billion project in Perak state, in conjunction with a Qatar company. This project, which will comprise an oil refinery, a petrochemical plant and storage facilities, is expected to come onstream in two years.'
Not surprisingly, analysts have upped their target prices for Rotary to 90 cents and beyond - and they are expected to continue re-rating it as project flows continue.
'Current wins are within our projections for this year,' said Investment Research. 'We are retaining our 'buy' rating but will be reviewing fair value with a view to an upward revision.'
Responding to news of new contracts and positive calls by analysts, Rotary's stock gained eight cents to 86 cents yesterday - its highest level since June last year.
CIMB said that new orders and the successful execution of projects could be catalysts for the share price to climb even further.
'Given a growing proportion of higher-margin overseas contracts in its order book, we will be reviewing our FY10-11 forecasts,' CIMB said. 'Rotary is trading at 9.5x CY10 P/E, at a steep discount to its regional peers, Dialog in Malaysia and Sino-Thai Engineering (average 15.5x).'
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