China Oilfield Technology- Stock battered but fundamentals unshaken

Summary: We visited China Oilfield Technology (COT) recently and believe the potential for enhanced oil recovery and COT's core business remains more than intact because of the mismatch between China's strong and growing demand for oil and its peaking domestic supply. COT has successfully delivered its RMB 100m order book for 4Q07, which is in line with our projection. We also expect to see more order visibility for FY08 as the year progresses. With its expertise in its core business and a strong asset base, we believe COT can sustain growth by 1) expanding its portfolio of services or 2) entering into a strategic alliance. We believe COT's fundamental story remains compelling, which is why we are maintaining our fair value estimate of S$1.01. COT is currently trading at S$0.49 or 52% below our fair value estimate. We reiterate our BUY rating.