Technics oil & Gas

Technics oil & Gas: has been awarded its first leasing contract worth $3.6m for two gas comopressor engine driven packages for a Msia client. The contracts are for 2 yrs + 1 yr options, and while small in size, margins are good. Nevertheless, given the estimated cost of $2m for each compressor package, DMG notes that if Technics wants to achieve scale, it would have to boost fixed assets and shift from the current asset-light model. Notes the high capex demand will likely tax Technics ability to pay dividends. The house keeps its Sell rating on poor fundamental outlook, with TP $0.64. Adds, asset heavy companies tend to be valued near book value, and its target P/B at 1.78x already incorporates a premium for delivering returns above cost of equity.