Broadly in line; maintain OUTPERFORM. Kencana posted a 2QFY7/11 net profit of RM51m, taking 1H bottomline to a record RM103m. At 47% of our full-year forecast and 48% of consensus estimate, it was broadly in line as maiden contributions from the Berantai and Sepat marginal fields should lead to a stronger 2H. The absence of an interim dividend was not surprising. We maintain our forecasts and target price of RM3.40. We continue to value Kencana at a 40% premium over our 14.5x target market P/E given the strong prospects for the sector and Kencana’s superior growth relative to the market. Other favourable factors are strong newsflow and high liquidity. Kencana remains an OUTPERFORM, with the potential re-rating catalysts being 1) more marginal field work, and 2) strategic partnerships.
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