Rotary Engg   

Rotary FA and TA

It is higher on hopes that that the company will secure more contracts on the back of increasing investment in new petrochemical facilities here, dealers said.



Rotary Engineering, which has supplied storage tanks for petrochemical facilities and oil refineries here, is seen as one of the main contenders for contracts at a new integrated petrochemicals complex that Royal Dutch Shell wants to develop on Bukom Island, dealers added.

 

Rotary Eng. looks like it is on the 5th wave.

 

Besides the favourable industry condition for Rotary,  from FA point of view HY06 eps is 4cts. Net profit margins have improved from 4% (HY05) to 7.9% (HY06).

Estimate FY06 eps should come in at between 8-9 cts. At today's price of 60cts, P/E is < 7.5X. In a growth sector...with the Shell, Exxon, SPC petrochem and refineries upgrades and recently announced tank farm by USA based Chemoil(???- not sure if name is correct), prospects of Co. filling up its orderbooks is excellent.

 

This is a growth stock and the price is undemanding. Look set to break last high of $0.625.  

 

Rotary Engineering (Rotary) has rode its way into the biodiesel bandwagon with an S$24m engineering, procurement, and construction (EPC) contract from Nexsol (Singapore) Pte Ltd, a subsidiary of Peter Cremer (Singapore) GmBH. This one-year contract involves the EPC of a biodiesel process plant and its related facilities on Jurong Island. This plant will produce biofuel and other downstream activities upon completion by end 2Q07.



Potential price catalysts in 2H06:1) potential EPC contracts win on Jurong Island, and 2) expectation of further HoH earnings upswing from higher percentage completion recognition for major oil storage terminal projects on Jurong Island.



Rotary's current net order book is estimated at S$465m, all of which will be delivered by end 2007. We have kept our fair value estimate at S$0.88, and our BUY rating on Rotary.

Source :OCBC

 

Rotary is also getting into the biodiesel pie.



It has been awarded a contract by Nexsol (Singapore) Pte. Ltd, a subsidiary company of Peter Cremer (Singapore) GmBH for the Engineering, Procurement and Construction (EPC) of a biodiesel process plant and its related facilities on Jurong Island (the "Project") to produce biofuel and other downstream derivatives.



The contract value of the Project is $24m and is targeted to be completed by end June 2007. Positive contribution is expected from the Project but the Company does not expect any material impact on the net tangible assets and earnings per share of the Company for the financial year ending 31 December 2006.

 

The chart is also looking quite good. It is within a stone throw to its one-year high of $0.625. No doubt that this is a stock with good potential gain. Is this the right price level to enter from TA angle? 

 

Shell has announced the setting up of its Shell Eastern Petrochemicals Complex on Pulau Bukom. This project will be kicked off in late 2006 with the construction of the ethylene cracker. Given Rotary's illustrious record on Jurong Island, it is likely to be one of the main contenders for a bite at part of this US$3b project. Rotary is one of the leading providers of engineering, procurement and construction (EPC) and maintenamce services on Jurong Island, and is also currently providing maintenance works for Shell's petroleum refinery on Pulau Bukom. Also, Rotary will almost reach the halfway mark for the $535m Universal Terminal project by end 2006, which should serve as a good resume on its capability to do mega sized EPC projects.



OCBC has a upgraded its fair value to $0.88.

 

Extracted from my blog http://kelongstocks.blogspot.com Closest comparable is Hiap Seng. Rotary is much larger than Hiap Seng in terms of revenues and profits and hence deserves to trade at higher P/Es though Hiap Seng can see higher percentage growth in EPS due to low earnings base. Hiap Seng has a more attractive Price/NTA ratio as well as dividend yield but earnings are going to be more volatile than Rotary and appears to be fairly valued at current price. Rotary is looking at more than 50% growth in revenues and net profits for 2006 and should also do well for 2007; hence it should be trading at higher P/Es. Pegging Rotary at 14x forward 2006 P/E yields fair value of $0.64.

 

Extracted from my blog [url]http://kelongstocks.blogspot.com[/url] Fundamental Analysis will be posted tonight [B]Technical Analysis[/B] Chart shows Rotary has been on a downtrend since hitting a high of 59.5 cents on 02 Feb 06. It has dipped below the EMA 50 line at 51 cents on 06 Mar 06. Rotary is now resting near the strong support at 49.5 cents. Supports: 49.5 (EMA 100, recent support from late Dec 05 to late Jan 06, and late Feb 06), 49 cents (resistances turned support, prior highs achieved in late Sep 05 and mid Dec 06) Resistances: 51 cents (downward sloping resistance), 52 (recent support, prior resistances), 53.5 (recent highs in late Feb and early Mar 06) and 55 (recent high on 04 Jan 06) Indicators: Neutral, RSI in between overbought and oversold zone, MACD slightly negative, stochastics hovering above oversold zone. Volumes have been pretty low during this correction phase with significant pickup on the belt-hold candlestick on 24 Feb 06, which is an encouraging sign. Interesting note is that prices have held above the EMA 100 and EMA 200 line since the belt-hold candlestick on 07 Nov 2005. EMA 100 was tested 6 times since then, on the occasion that it was breached, the EMA 200 line held firm. Those interested in this counter should see if EMA 100 can hold in the coming days, if so, might be worth accumulating, otherwise if EMA 100 breaks, wait near the EMA 200 support.