AmResearch upgrades Scomi to buy (Edge)

AmResearch Sdn Bhd has upgraded SCOMI GROUP BHD [] to buy, from hold previously, at 46 sen with a higher fair value of 76 sen, previously 48 sen, based on PE multiple of 12 times — in-line with peer average.


It said the upgrade was premised on its revision in earnings by 4% to 27% to RM71 milllion-RM96 million for FY10F-FY12F.


'Second, Scomi is currently trading towards the lower end of its PE band at a multiple eight times. Having said that, we believe revenue from drilling fluids and drilling waste management should pick up.


'Another re-rating catalyst would be forthcoming for Scomi, if it were successful in securing new monorail jobs. First phase awards for monorail work in Brazil (24km) — valued at US$2 billion — should be announced within the next few weeks,' it said.


The research house said Scomi was confident of securing at least a few more monorail projects, such as in India.


There is also a possibility of Scomi being involved in the expansion to the KL monorail system and signalling works for the Putra and LRT systems — worth close to RM1 billion, it said.