Rotary

Rotary: OCBC says not time to buy yet, even though share price plunged 22% in May against the STI’s 7% decline, on the back of disapptg 1Q12 results, continued uncertainty in the global economy, and investors’ preference for defensive non-cyclical counters. The stock is now trading near its 3-yr historical low, at ~1x P/B, 1SD below its 5 yr avg. The house notes Rotary is facing headwinds from several fronts, i) fewer contracts awarded by oil companies, ii) rising political risks in the Middle East, and iii) severe pricing competition, which in aggregate, has led to falling gross margins and lower net order book. Sees more downside risks arising from, i) additional costs on the SATORP project due to stricter than expected requirements, ii) further delays on the Fujairah project due to engrg design variations. Maintains at Hold with TP $0.50.