KUALA LUMPUR: AmResearch has reaffirmed its SELL rating on TANJUNG OFFSHORE BHD [] with an unchanged fair value of RM1.33 per share ' pegging fully diluted FY11F PE to 16 times.
Tanjung Offshore was reprimanded by Bursa Malaysia due to a 37% deviation in the reported net profit for FY09.'' Its earnings were RM3 million versus RM4.9 million initially reported during the release of 4QFY09 numbers.
The large deviation could be due to the over recognition of earnings which were related mostly to the insurance claims made by its associate company, Cendor Mopu Producer Ltd, and post acquisition profit in respect of its subsidiaries.
'We gather it was initially recommended by its auditors for the items to be included in FY09 earnings although somehow after an audit review, these items were not deemed to be appropriate for recognition in FY09. While it does not look good on the company, we view this as a one-off event.
'However, looking forward, while the oil and gas sector is very much positive given the expected strong pick-up in E&P works, we are not too positive about Tanjung Offshore,' it said.
AmResearch said while valuation is demanding ' currently trading at FY11F PE of 17 times, it was also cautious about the company's execution.
'Elsewhere, while it makes sense for Tanjung to bid for the right to develop the marginal fields'' ' it supplies MOPU and engineering equipments ' Tanjung's balance sheet is quite highly-leveraged with a current net gearing of 1.4 times,' it said.
Tanjung Offshore was reprimanded by Bursa Malaysia due to a 37% deviation in the reported net profit for FY09.'' Its earnings were RM3 million versus RM4.9 million initially reported during the release of 4QFY09 numbers.
The large deviation could be due to the over recognition of earnings which were related mostly to the insurance claims made by its associate company, Cendor Mopu Producer Ltd, and post acquisition profit in respect of its subsidiaries.
'We gather it was initially recommended by its auditors for the items to be included in FY09 earnings although somehow after an audit review, these items were not deemed to be appropriate for recognition in FY09. While it does not look good on the company, we view this as a one-off event.
'However, looking forward, while the oil and gas sector is very much positive given the expected strong pick-up in E&P works, we are not too positive about Tanjung Offshore,' it said.
AmResearch said while valuation is demanding ' currently trading at FY11F PE of 17 times, it was also cautious about the company's execution.
'Elsewhere, while it makes sense for Tanjung to bid for the right to develop the marginal fields'' ' it supplies MOPU and engineering equipments ' Tanjung's balance sheet is quite highly-leveraged with a current net gearing of 1.4 times,' it said.
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