After disappointments from Amec and Wood Group the market must have been concerned about the Petrofac figures but careful guidance look like it has paid off and a higher than expected order book looks like franks the second half profit expectations. Accordingly there is no risk to the long term target for earnings and with a high quality portfolio of projects, secured at excellent margins allaying market fears, Petrofac should be a safe haven in the sector. Expect a very strong 2nd half and of course a big final dividend will please holders in a stock not normally bought for yield.
We remain very positive with a target price of 1850p, meeting at 0930 hours.
Kentz Corp – From DFT – DY
A very solid set of interim results from Kentz today. The backlog hit a record level of US$2.8bn, 80% of which is reimbursable. Revenue was up 2% at US$775.2m with PBT up 8% at US$55.4m yielding a margin of 7.1%. The interim dividend is 6.6 cents per share. Cash is sitting at cUS$230m, in line with our forecasts as are the other headline numbers.
These results confirm that Kentz is not only performing, but us also attractive as a takeover target. Certainly the numbers confirm that the Amec bid is far too low. There was speculation in the press over the weekend that some shareholders would start to entertain a bid of over 650p, we still feel that this would be too low and bids over 700p are more reflective of a realistic offer. We expect the share price to strengthen today on these results as well as continued takeover speculation.
I am, temporarily, suspending my BUY recommendation on Lamprell ahead of their results on Thursday. This is only a matter of caution as the signals coming from the company lately have been rather mixed. This may be due to a new IR firm taking over and getting to know the company but it may signal something more sinister. On Thursday there are already two service companies report (Cape and Hunting) and both have meetings in the morning one of which conflicts with Lamprell. It may be my old fashioned feeling of cynicism but for the sake of risk avoidance I think I can be better rewarded by acting cautiously. Also the analysts visit to Lamprell, once meant for late summer and now delayed indefinitely was meant to be a chance to kick the tyres, if this is off one can’t judge the management and one certainly can’t do that if the results meeting is scheduled at the last minute to clash with Cape…………….. Watch this space.