News Yesterday, Pestech International (PESTECH) announced that its whollyowned subsidiary company, Pestech Technology Sdn Bhd (PTSB) had received Letters of Awards from subsidiaries of Sarawak Energy Bhd (SEB), namely Sejingkat Power Corp Sdn Bhd and PPLS Power Generation Sdn Bhd, for the Sejingkat Power Plant Project for a total contract value of RM885,100.

 The projects, which to commence in Nov 2014 and last for nine months, involve the supply, installation, testing and commissioning of an information management system as part of the expansion plan for the control system.

Comments Although this is just a small contract win, it does open up a new revenue stream to PESTECH as this is its first win for this type of brownfield project. With a track record in such project, PESTECH would likely clinch more brownfield projects from SEB in the future.

 This is its 4th contract win this year, bringing YTD total contract wins to RM366.7m. This is higher than our CY14 new contract replenishment assumption of RM350m. Our FY15 (18-months period from Jan 2014 to Jun 2015) order replenishment assumption is RM550m.

Outlook Its current order book of RM600m should provide approximately two years of firm earnings visibility. The current major tender book is c.RM1b with PESTECH having a fair chance of securing c.RM800m which will be announced from now till early 2015.

Forecast  No changes to our FY15-FY16 estimates.

Rating   Maintain OUTPERFORM

Valuation We keep our price target of RM4.36/share unchanged based on CY15 PER of 13x.

Risks to Our Call  Failure to replenish orderbook.

 Cost over-runs.

Source: Kenanga