Credit Suisse increases Drake & Scull price target
Credit Suisse raised its price target on Dubai contractor Drake & Scull International to Dh1.22 from Dh1.19 citing higher-than-expected backlog additions and a more positive outlook for new contracts this year.
The brokerage said Drake – which specialises in mechanical, engineering and plumbing businesses – secured Dh1 billion worth new contracts during the first quarter, 90 per cent through existing operations.
The company's end-of-year backlog also exceeded the expectations of the brokerage, which has an outperform rating on the stock. Credit Suisse also cited Drake's geographical diversification outside Dubai as a reason for the price target increase, with Dubai's share of the backlog falling quarter over quarter.
Drake has been rapidly expanding operations outside Dubai and in February a company executive said it has $136 million (Dh499.5m) to spend on acquisitions in 2010, including a firm in Qatar and two in Saudi Arabia.
Credit Suisse said Drake's acquisition of a sister company in Qatar is set to conclude next week and that this should be a catalyst for the stock performance.
"If the acquisition price falls within a reasonable range and management were able to provide clear guidance for backlog growth, we expect the market to take it as a positive catalyst for the stock," the brokerage said in a note.
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