Kencana - Construction of KM1 completed (CIMB)

Kencana is set to meet both our and market expectations when it releases its FY7/10 results on 29 Sep. We expect 11% growth in the full-year bottomline to a new high of around RM132m, fuelled by the completion of the KM1 drilling rig and mobilisation of two new AHTS vessels. FY11 is set to be another record year as drilling operations get underway. Although we maintain our EPS forecasts, our target price rises from RM2.15 to RM2.28 as we roll it forward to end-CY12 and apply our revised target market P/E of 13.8x (previously 15x). We continue to rate Kencana an OUTPERFORM given the likelihood of active top-up of its RM2.4bn order book and M&A opportunities.