Thursday, May 22, 2008

Ramunia Rises On Project Termination

KUALA LUMPUR: Ramunia Holdings Bhd rose 13% or 17 sen to RM1.47 yesterday after its RM2.2 billion contract secured from an Indian concern was terminated due to its inability to provide the required performance bank guarantee and insurance certificate.

The stock initially fell to its intra-day low of RM1.22 in the morning session but shortly recovered and rose to its intra-day high of RM1.47 at the close, with over 16 million shares done.

Maintaining a trading buy on Ramunia at RM1.30 yesterday with an unchanged scenario-based target price of RM1.70, Aseambankers Research said it was net positive on the turn of events, which would accelerate MISC Bhd’s reverse takeover of Ramunia.

“Any share price weakness from this perceived negative newsflow is an opportunity to accumulate as investors will be essentially buying into MMHE — a direct proxy to Petronas’ Malaysian O&G play,” it said in a research note yesterday.

Aseambankers Research said Ramunia had conceded defeat in taking on the US$685m (RM2.2 billion) ONGC B-193 project in India, as it was unable to provide a performance bank guarantee and insurance certificate by the May 15 deadline.

Ramunia had earlier sought for an extension of time until May 31 to comply with the project’s additional requirements. It would have to forfeit the US$500,000 (RM1.6 million) bid security due to the contract cancellation.

“We are informed that it will not incur additional penalty charges from this project withdrawal as both ONGC and Ramunia have mutually agreed that the termination has no additional binding clauses. As such, Ramunia will recognise the RM1.6m loss in 3QFY08,” Aseambankers Research said.

The research house said the ONGC project was a major obstacle during the due diligence exercise carried out earlier, as it was perceived to be loss-making.

“This is consistent with our view all along that the ONGC turnkey project would not have been profitable, as it would have at best, yielded only razor-thin margins if executed well,” Aseambankers Research said.

It said the termination would drastically cut Ramunia’s outstanding order book by 77% to RM486 million.

“However, we are optimistic that the ONGC loss will be compensated with new orders from Petronas local offshore fabrication projects from FY09 onwards, which should potentially generate higher margins,” it said.

Aseambankers Research said it was cutting Ramunia’s FY08 core net profit by 31% to reflect the loss on ONGC’s project but retained FY09-10 forecasts.

NEWS OR TECHNICAL ANALYSIS?

Which one you will follow? Seem like analyst also agree with my target. haa..haa.. 1.70 will be a strong resistance. I will throw when it hit this level. Unless.... something happen. Cheers and happy riding with RAMUNIA.
- BullTrader

No comments: