The FTSE Oil and Gas index has performed more or less in-line with the broader market this year. Still, it is among the top three best-performing FTSE sub-indices YTD, along with the FTSE Telecommunications and FTSE Maritime indices. Stepping into 2014, we continue to advocate a focused stock-picking strategy, overweighting companies that are operating in sub-sectors with more favourable demand-supply dynamics, and those with strong balance sheets and order books. The local rigbuilders are expected to continue securing orders at a pace that will at least match this year’s, while the offshore support vessel sub-sector should also see continued recovery as the market situation gradually tilts in favour of vessel owners. Maintain OVERWEIGHT on the oil and gas sector, preferring Keppel Corporation [BUY, FV: S$12.87], Sembcorp Marine [BUY, FV: S$5.68], Ezion Holdings [BUY, FV: S$2.57] and Nam Cheong Ltd [BUY, FV: S$0.37].
Index mostly in-line with market; among top three best performing sub-indices
The FTSE Oil and Gas index has performed more or less in-line with the broader market this year. Still, it is among the top three best-performing FTSE sub-indices YTD, along with the FTSE Telecommunications and FTSE Maritime indices. On the other hand, price performances of individual stocks have differed greatly, with the key outperformers being Kreuz Holdings (+95% YTD) and Ezion Holdings (+45% YTD) in the Offshore & Marine space.
Positive on the rig building sector and certain OSV segments
Stepping into 2014, we continue to advocate a focused stock-picking strategy, overweighting companies that are operating in sub-sectors with more favourable demand-supply dynamics, and those with strong balance sheets and order books. The local rigbuilders are expected to continue securing orders at a pace that will at least match this year’s, while the offshore support vessel sub-sector should also see continued recovery as the market situation gradually tilts in favour of vessel owners – the Indonesian and Malaysian OSV sectors are especially looking relatively promising. Meanwhile, subsea tendering activity remains firm.
Solid long-term fundamentals; near term driven by macro events
We believe that the offshore sector has strong long-term fundamentals as countries have an interest in fulfilling as much domestic demand as possible in order to boost energy security. Investors should be mindful, however, that macro events remain a key driver of the broader sector in the near term. Going into 2014, we remain OVERWEIGHT on the oil and gas sector, as we expect that the favourable oil price environment will continue to be conducive for capital expenditure. Our preferred picks are Keppel Corporation [BUY, FV: S$12.87], Sembcorp Marine [BUY, FV: S$5.68], Ezion Holdings [BUY, FV: S$2.57] and Nam Cheong Ltd [BUY, FV: S$0.37].
The FTSE Oil and Gas index has performed more or less in-line with the broader market this year. Still, it is among the top three best-performing FTSE sub-indices YTD, along with the FTSE Telecommunications and FTSE Maritime indices. On the other hand, price performances of individual stocks have differed greatly, with the key outperformers being Kreuz Holdings (+95% YTD) and Ezion Holdings (+45% YTD) in the Offshore & Marine space.
Positive on the rig building sector and certain OSV segments
Stepping into 2014, we continue to advocate a focused stock-picking strategy, overweighting companies that are operating in sub-sectors with more favourable demand-supply dynamics, and those with strong balance sheets and order books. The local rigbuilders are expected to continue securing orders at a pace that will at least match this year’s, while the offshore support vessel sub-sector should also see continued recovery as the market situation gradually tilts in favour of vessel owners – the Indonesian and Malaysian OSV sectors are especially looking relatively promising. Meanwhile, subsea tendering activity remains firm.
Solid long-term fundamentals; near term driven by macro events
We believe that the offshore sector has strong long-term fundamentals as countries have an interest in fulfilling as much domestic demand as possible in order to boost energy security. Investors should be mindful, however, that macro events remain a key driver of the broader sector in the near term. Going into 2014, we remain OVERWEIGHT on the oil and gas sector, as we expect that the favourable oil price environment will continue to be conducive for capital expenditure. Our preferred picks are Keppel Corporation [BUY, FV: S$12.87], Sembcorp Marine [BUY, FV: S$5.68], Ezion Holdings [BUY, FV: S$2.57] and Nam Cheong Ltd [BUY, FV: S$0.37].
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