Excerpts from latest analyst reports.....

DMG & Partners initiates coverage of OTTO MARINE with 'buy'

Otto Marine's PT Batamec yard in Batam. Photo by Leong Chan Teik

Analysts: Tan Chee How & Terence Wong

Otto Marine (OM) is
one of the top 10 Anchor Handling Tug Supply (AHTS) vessel builders in the world, serving a long list of global customers.

In addition to its shipbuilding
business, OM also operates ship repair and conversion business.

Its future
growth driver, however, would be the ship chartering business which utilises vessels that are either wholly owned or owned through strategic partnerships.

As Asia is expected to become one of the biggest offshore spenders globally, OM, which is based in strategic locations in Asia, is set to ride on the wave of growing demand for offshore support vessels.
DMG's forecast of Otto's performance.

Based on peers’ 0.63x PEG
FY10, we arrived at OM’s target price of S$0.525 which represents 12.7x P/EFY10. Initiate with BUY.

Key concerns addressed. Some concerns that investors may have include (i)
mass termination of shipbuilding orders, (ii) change in major shareholders of OM and (iii) execution risk related to building of 21k bhp AHTS for Mosvold Supply. These issues are largely behind the company.

Our report on a recent visit by analysts and fund managers to Otto Marine's yard in Batam here.

DBS Vickers initiates coverage of PEC with a 'buy'

Analysts: Chong Wee Lee & Jeremy Thia 

DBS Vickers' forecasts for PEC's performance

A leading EPC player in Singapore. PEC Ltd provides engineering, procurement, construction, and maintenance (EPCm) services for oil and gas downstream activities in Singapore, Malaysia, Middle East, Thailand, and Indonesia. This is supported by existing fabrication facilities in the region,with a new one in the Middle East by end 2010.

Order wins in 1Q10 surprise on the upside. We estimate that PEC has S$80m new orders in 1Q10 (FYE June). This includes small contracts (<S$10m each), variation orders, and the S$50m worth of project works from ExxonMobil.

PEC is
expected to secure more EPCm orders from supporting the petrochemical plant constructions in Singapore’s Jurong Island, and the Middle East. We expect new orders to be S$230m in FY10, and S$275m in FY11, assuming a 30% hit rate on PEC’s current S$500m order pipeline in 2Q-4Q FY10.

Surplus net cash of S$0.07 per share. We project that PEC has S$0.32 net cash per share by end FY10. The estimated surplus net cash by end FY10, which is beyond its existing business’ financial needs, is S$0.07 per share.

This is derived
after taking into account PEC’s conservative capital structure, which has resulted in its historical usage of 15 S cents pershare of net cash to support a dollar of revenue.

41% upside to target price of S$0.88. Our target price of S$0.88 for PEC is based on:
1) 12x blended FY10/11 PE (FYE
June) for the less volatile repair and maintenance business, and 9x for its project works, and
2) Estimated S$0.07 surplus net
cash per share. Initiate coverage with a BUY on PEC.

DMG & Partners has a 29.5-cent target for ADAMPAK

DMG's forecast of Adampak's performance (in US$)

Analysts: James Lim & Terence Wong

HDD-component manufacturer Adampak saw 3Q09 sales that were in line with our forecasts although net profit was above our expectations as the company managed to reap better economies of scale. With the outlook for hard disk drives (HDD) still looking bullish, we now expect Adampak to record net profit growth of no less than 37% in 4Q09 YoY.

We therefore maintain BUY with an unchanged
target price of S$0.295 based on our dividend discount model.

Slight changes to our forecasts: While we have opted to be conservative intweaking our estimates for FY09, we still expect Adampak to record no less than an 18.1% increment in sales and a 37.5% gain in net profit for 4Q09 on a YoY basis – this equates to top and bottomline at US$15.0m and US$2.0m, respectively. We have also raised our FY09 net profit forecast to US$6.0m from our previous estimate of US$5.8m.

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