OCBC downgrades Rotary Engineering to hold

Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.61

OCBC Investment Research lowered Singapore’s Rotary Engineering (ROTE.SI), a construction firm that specialises in energy projects, to hold from buy and cut its target price to $0.61 from $0.66.

Rotary Engineering reported on Thursday a 30% fall in profit to $7.2 million, below OCBC’s expectations, due to lower contribution from its Middle East business which accounts for more than half of the group’s revenue.

“Rotary’s operating environment continues to be clouded by the uncertainty in the global financial markets and the slowdown in the U.S. and European economies. We see increased likelihood of oil companies pushing back their larger infrastructure investments,” OCBC said in a report.

The brokerage also said it expects Rotary to face margin pressure from its competitors in the near term, but noted that the company has a strong balance sheet and a healthy order book of $758 million.

At 11:11 a.m., shares of Rotary were up 2.4% at $0.63. The shares have fallen about 38% since the start of the year.