KUALA LUMPUR: CIMB Equities Research is positive on Kencana Petroleum Bhd?s proposed buy-out of Mermaid's shares in three jointly owned drilling units for US$66.6 million.

It said on Tuesday, June 22 that one of the target units is MKR1, which owns drilling rig KM1.

?We take a positive view of the acquisitions because they will give Kencana total control of the drilling assets and provide an earnings boost. The deal is slated for completion in 1QFY1/11,? it said.

CIMB Research said imputing the new earnings stream, it raised its FY11-12 EPS forecasts by 11.3-14.0% while retaining its FY10 forecast.

?Our target price rises from RM1.90 to RM2.15, pegged to an unchanged target market P/E of 15x. Kencana remains an OUTPERFORM, with the potential share price triggers being 1) active order book replenishment, and 2) M As,? it said.