Boustead Heavy Industries BUY
Price target RM9.00
Share price at 16 May RM4.94
Investment summary
Last Friday, BHIC announced a new contract to fabricate two barges valued at RM205m for Swire Offshore, raising YTD secured order book to RM400m. The company is on track to meet HLG expectation of RM1bn new orders for FY08. We are maintaining our EPS forecast for FY08-10E and target price of RM9.00/share based on 16x FY09E. The new orders re-affirm our BUY rating on the stock. We remain bullish on BHIC because: (1) BHIC is negotiating for the next batch of Offshore Patrol Vessels (OPV) valued at RM5-7bn (2) vessel charter rates at record-high levels are fuelling demand for offshore support vessels (3) Petronas plans to award >RM8bn O&G fabrication contracts in the next five years.
Still cheap
New order was within our expectation of RM1bn new contract for FY08 and raises its earning visibility for FY08-09. Share price has declined 36% from its high of RM7.75/share in end CY07. We think share price will re-rate: (1) confirmation of orders for remaining 21 OPV jobs for BNS (2) steady commercial order-flow for BPS.
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Saturday, 7 June 2008
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