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Broker tips Greka Engineering to benefit from Green Dragon funding

Last updated: 00:40 20 Nov 2014 AEDT, First published: 01:40 20 Nov 2014 AEDT

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Greka Engineering (LON:GEL) should get a significant boost from main customer Green Dragon Gas’s (LON:GDG) US$88mlm funding last week, according to RFC Ambrian.

The cash will allow Green Dragon to drill 150 LiFaBriC wells on its Shizhuang South (GSS) production block.

An agreement between Green Dragon and its partner CUCBM specifies US$250mln being spent on additional infrastructure in the GSS production block.

If a tiny fraction of this could be captured by Greka, it would make a substantial difference to its financial performance, said RFC Ambrian.

In the near term, RFC Ambrian has lowered its 2014 revenue forecast to US$5.4mln, though notes this is still well up on last year’s US$3.7mln.

The house broker still expects Greka to move into the black in 2015 (US$0.2mln) and make US$1.1mln in 2016.

Its investment stance is speculative buy, though the target price is now 3.3p per share against 4.5p previously.

Shares are currently 1.25p.

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