PEC

PEC: OCBC upgrades to buy and raises TP to $0.86 from $0.64. Note that share price has fallen by almost half from its peak of $1.37 per share in Jan11 and may have already bottomed out. House now see very deep value in the group, with its stock trading at 15% discount to its book value of S$0.79 per share with a net cash of $0.44 per share or 64% of its market capitalization. Excluding its net cash value, it is trading at just 3x PER. Meanwhile, channel checks inform house that the current pricing levels are too tight for the downstream EPC subcontractors to bear, and are unsustainable in the long run. A gree and therefore believe that a margin reversion may be possible in the near- to medium- term horizon.