The oil and gas scene in Singapore witnessed a busy first quarter this year in terms of new contracts secured, M&A news and other corporate actions such as fund raising. This was driven by macro events such as tensions in the Middle East, unplanned outages and monetary actions by central banks, which were all manifested in the high oil price. Taking stock, we see that the outperformers YTD are STX OSV (54%), Sembcorp Marine (39%) and Ezion Holdings (42%). This compares with the STI’s 14% rise. Looking ahead, we are still constructive on the sector given the superior earnings visibility for certain stocks and solid industry fundamentals. Our preferred picks are Keppel Corporation, STX OSV and Ezion Holdings.
Starting the year with a bang
When we wrote our Oil and Gas strategy report “Taking a well-deserved rest before the next lap” in early Dec last year, there was a palpable sense that the brief respite in the last few months of 2011 would soon be overshadowed by macro headlines and corporate actions. Indeed, the sector came back into focus the first trading day of the year, as WTI crude hovered above the US$100/bbl benchmark. The subsequent rally in crude prices drove interest in oil and gas plays, and high trading volumes were accompanied by strong price gains.
What’s the story so far?
The oil and gas scene in Singapore witnessed a busy first quarter this year in terms of new contracts secured, M&A news and other corporate actions such as fund raising. This was driven by macro events such as tensions in the Middle East, unplanned outages and monetary actions by central banks, which were all manifested in the high oil price.
Leaders and laggers back home
Back home, the outperformers YTD are stocks such as STX OSV (54%), Sembcorp Marine (39%) and Ezion Holdings (42%). This compares with the STI’s 14% rise and underperformer KS Energy’s 7% decline.
Bolstered by solid industry fundamentals
We switched our preference from Sembcorp Marine to Keppel Corporation [BUY, FV: S$12.27] after we downgraded the former to HOLD in late Feb. However, we are still constructive on the rig builders for their superior earnings visibility and solid industry fundamentals. We continue to like STX OSV [BUY, FV: S$2.25] for its resilient industry positioning and excellent operational capabilities. Meanwhile, Ezion Holdings [BUY, S$1.05] remains as our preferred small-mid cap pick given management’s focus on securing projects with decent ROEs and its ability to do so given its wide network of contacts in various parts of the world.
When we wrote our Oil and Gas strategy report “Taking a well-deserved rest before the next lap” in early Dec last year, there was a palpable sense that the brief respite in the last few months of 2011 would soon be overshadowed by macro headlines and corporate actions. Indeed, the sector came back into focus the first trading day of the year, as WTI crude hovered above the US$100/bbl benchmark. The subsequent rally in crude prices drove interest in oil and gas plays, and high trading volumes were accompanied by strong price gains.
What’s the story so far?
The oil and gas scene in Singapore witnessed a busy first quarter this year in terms of new contracts secured, M&A news and other corporate actions such as fund raising. This was driven by macro events such as tensions in the Middle East, unplanned outages and monetary actions by central banks, which were all manifested in the high oil price.
Leaders and laggers back home
Back home, the outperformers YTD are stocks such as STX OSV (54%), Sembcorp Marine (39%) and Ezion Holdings (42%). This compares with the STI’s 14% rise and underperformer KS Energy’s 7% decline.
Bolstered by solid industry fundamentals
We switched our preference from Sembcorp Marine to Keppel Corporation [BUY, FV: S$12.27] after we downgraded the former to HOLD in late Feb. However, we are still constructive on the rig builders for their superior earnings visibility and solid industry fundamentals. We continue to like STX OSV [BUY, FV: S$2.25] for its resilient industry positioning and excellent operational capabilities. Meanwhile, Ezion Holdings [BUY, S$1.05] remains as our preferred small-mid cap pick given management’s focus on securing projects with decent ROEs and its ability to do so given its wide network of contacts in various parts of the world.
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