KUALA LUMPUR (April 9): Kenanga IB Research has maintained its “Outperform” rating on Pestech International Bhd at RM5.36 with a higher target price of RM6.11 (from RM5.06) and said Pestech was now a concessionaire player after securing a 25-year power transmission contract in Cambodia yesterday.
In a note today, the research house said this was definitely a price catalyst to Pestech as the recurring income of circa RM16 million-RM20 million per annum almost matches its reported earnings in CY14.
In addition, the research house said it saw no reason for PESTECH not getting the EPC portion as well, which could be worth US$70 million, of this project since it was the project owner and also due to its track record.
“In all, this asset will add 42 sen per share to our Pestech’S valuation or 68 sen per share on a bullish scenario.
“However, net gearing will jump to 0.87x by FY17E from 0.46x in FY13. We re-rate its existing business to 16.6x PER (+1.5 3-year SD), from 15x PER, which is justified by its explosive 3.5-year CAGR of 63%.
“Thus, we upgrade the price target to RM6.11 from RM5.06. Outperform maintained.
At 9.37am, Pestech rose 2.99% or 16 sen to RM5.52 with 240,700 shares traded.