Improving orderbook replenishment. While contract flow has been slow since early 2009, the company now expects to be awarded sizeable contracts given the pick-up in E&P activities stemming from rising demand for energy. Given the orderbook replenishment of around RM1-1.2bn by 4Q 2010 and burn-rate of around RM300m/quarter, we expect Kencana’s orderbook to remain above RM1.9bn going into 2011. Kencana is currently tendering another RM4bn worth of orders, which include fabrication contracts in Malaysia and overseas. With the upgrade in the Lumut yard (i.e. tonnage handling capability increased to 30,000 tonnes from 20,000 tonnes previously) nearing completion, we believe Kencana stands a good chance of securing higher-margin deepwater jobs.
Kencana Petroleum Berhad : Going Into IPF-20/04/2010
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