Kencana ... May10

It had secured four contracts recently, the latest being a RM45 million contract from India’s Larsen & Toubro announced on Tuesday. This takes its order book to just a shade below RM2 billion.

Expecting more contracts to be announced in the coming months (May 2010 & Beyond). Kencana is aiming for RM1 billion worth of new fabrication contracts in 2010, of which 70% is expected to be domestic jobs.

Its wholly owned unit and main fabrication arm Kencana HL has been awarded a US$14 million (RM45 million) contract to construct jackets for offshore platforms to be located in India. The client is India’s Larsen & Toubro. This one-off contract is expected to run from 1Q to 3QFY7/11.

The management continues to deliver its promise of growing the order book. The recent contract is Kencana’s fourth since April 15 2010. The new contracts, worth a collective RM336 million, take Kencana’s outstanding order book to slightly below RM2 billion.

Capacity is not an issue as Kencana’s 169-acre yard in Lumut is running at 50% utilisation with extra space earmarked for new contracts.

New contracts (Malaysia, India and Australia) and new ventures (offshore support, drilling and pipeline installation) fuel our optimism on Kencana.

Favourable earnings prospects and its strategy of moving up the value chain with the new ventures.