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CS ups Drake & Scull price target

Dubai, April 6, 2010

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, a specialist in mechanical, engineering and plumbing businesses, had secured Dh1 billion worth of 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 told Reuters that it has $136 million 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.

Shares of the company were down 1 per cent at 0.98 dirhams at 1013 GMT.-Reuters




Tags: Credit Suisse | Drake & Scull | price target |

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