Ramunia Upside 35.6%
Sun Financial Daily
27 December 2005

Ramunia Holdings Bhd has received a ‘buy’ recommendation at RM1.01 by SBB Securities Sdn Bhd, which sees a 35.6% upside based on a fair value of RM1.37 per share.

In a report on the company, SBB Securities said it conservatively valued the stock at RM1.37 based on a 9.5 times price earnings ratio (PER) after ascribing a 20% premium to the industry PER average of 7.9 times FY06 earnings.

“We believed that Ramunia should be accorded a higher premium given its stronger financials and stronger EPS (earning per share) growth of 85% for FY06”, it said, adding that Ramunia’s gearing was also comparatively low.

Ramunia’s business ranged from engineering, procurement, construction and maintenance of offshore vessels, oil rigs and structures to equipment and heavy equipment manufacturing for the oil and gas industry.

It said: “Current order book stands at RM470 million and this will jump to over RM1 billion in 2007 (and) the group is continuously bidding for new jobs locally and abroad in order to have a sustainable order book of about RM1 billion annually.”

SBB Securities’ buy call was based on several factors including the growing need for energy, which is expected to grow by 1.6% annually over the next 25 years and expected annual growth rate for oil and gas of 1.4% and 1.8% respectively.

With only about half of the 565,555 sq km in Malaysia explored so far and an increasing trend for deepwater exploration and development, SBB Securities saw a lot of potential for Ramunia and its competitors. “Going forward, we estimate a 218% year-on-year jump in FY06 revenue to RM630 million. In line with revenue growth, net profit is expected to rise 85.4% to RM31.8 million,” it said.

SBB also expected Ramunia’s revenue growth for FY07 to rise 133.7% to RM1.47 billion with net profit rising 135.5% to RM74.9 million.

“Our forecast is premised on the group’s plan to venture into deep-water projects by 2006 and new bids submitted worth RM2 billion. In addition, (its) management is confident of securing two overseas jobs worth more than RM500 million.