Stock Name: SILKHLD
Company Name: SILK HOLDINGS BERHAD
Research House: MIDF



MIDF Research is maintaining its "BUY" recommendation for Silk Holdings Bhd (SHB) with a target price of RM0.46 as the company's earnings prospects was fairly bright, driven by the expected growth in the oil and gas sector.

Silk Holdings is responsible for the construction of Kajang Dispersal Link Expressway, upgrading and widening of existing roads and, the design and construction of a new alignment.

In a research note today, MIDF said the valuation was based on a discounted cash flow valuation for the highway subsidiary, using a weighted average cost of capital of 4.38 per cent.

The justification also included 10 times the price earnings ratio for the projected financial year 2011 for the highway operator's oil and gas division.

"The oil and gas division continues to be the group's focus, contributing 81 per cent to group revenue, as it continued to secure new, medium and long-term contracts," it said.

The research house expects to see further growth in the oil and gas division as the RM3 billion Petronas platform maintenance contract and the RM2 billion Exxonmobil enhanced oil recovery project would support major and supporting players such as Silk Holdings. - BERNAMA