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Thursday, February 7, 2013

Ahmad Zaki Resources - Ahmad Zaki 2.0 (OSK)

buy Fair Value : MYR 1.45

A defensive side that is under-appreciated.  Ahmad Zaki Resources (Ahmad Zaki) is beginning to see the fruit of its labour of having grown some defensive non-construction businesses, i.e. bunkering operation at Kemaman Supply Base, oil palm plantation in West Kalimantan, and the design, build, lease, maintain & transfer (DBLMT) of a teaching hospital for the International Islamic University Malaysia (IIUM) in Kuantan under the Private Finance Initiative (PFI). With their defensive, recurring and less cyclical incomes, these three businesses will materially boost the sustainability, visibility and resilience of Ahmad Zaki’s earnings.  Theoretically, a radically changed earnings profile (with enhanced stability) will appeal to a generally still risk-averse market.  Also, theoretically, enhanced earnings stability means reduced equity risk premium, translating to higher stock valuation or a re-rating.

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