ECMLibra Investment Research continue to be Overweight on the sector as news flow continue to be strong. But ECMLibra see that bigger caps like MMHE and even SapuraCrest hitting peak cycle valuations.
As such, ECMLibra pay more attention to small cap laggards like Wah Seong, Alam Maritim and even Perdana Petroleum. The only big cap ECMLibra favour now is Petronas Gas due to the upside potential from the new re-gasification terminal.
Selected Oil & Gas Stocks Fair Value, Target Price & Dividend Yield
OSK remain OVERWEIGHT on the O&G sector given the numerous opportunities to be mined by O&G service providers, spurred on by Pengerang’s development.
Two recent developments are;
- Dialog Group signed a Development Cum Joint Venture Agreement (DJVA) with the Johor State Government granting it the right to start land reclamation works in Pengerang in Malaysia’s Johor state, and use the reclaimed land for the construction of a Deepwater O&G Terminal.
- Petronas announced that its USD20bn Refinery and Petrochemical Integrated Development (RAPID) project, also to be located in Pengerang, will house an oil refinery, petrochemical plants and possibly, a LNG regas terminal.
Below are the target prices and ratings for selected Oil & Gas stock.
ECMLibra Investment Research continue to be Overweight on the sector as news flow continues to be heavy and very positive. There would be many more contracts to come from marginal fields, development projects (like Tapis), and deepwater developments.
Besides that, Petronas’s intention to increase drilling activity will also enhance the need for support vessels and drilling services and equipment.
On notable major shareholding changes, Employees Provident Fund was seen adding shares across the board, particularly in Petronas Chemicals, SapuraCrest, Wah Seong and KNM.
Table 1 :- Selected Oil & Gas Stocks Fair Value, Target Price & Dividend Yield
2010 proved to be a decent year for OSK’s Small Cap Jewels although their performance was eclipsed by the liquidity-infused rally, which benefited the bigger caps, particularly from 2H2010.
Of the 50 stocks profiled in handbook, half posted absolute returns in excess of 20%, with 49% outperforming the FBM Small Cap and FBM KLCI indices.
While the smaller caps are expected to bask in the glory their larger cap peers in 2011, investors should not ignore names with good longer term potential that are trading at attractive valuations.
OSK like small caps in the construction, property, oil & gas and consumer sectors as beneficiaries of the ETP, elections and earnings themes.
The table below are the 2010 performance of OSK Top 50 Small Jewels and performance since OSK’s Small Cap Jewels report released in April 2010.
The share prices of O&G stocks are undergoing a re-rating, largely fuelled by positive market sentiment and strong news flow. Going forward, partnerships or actual contract awards will be the main ‘push’ factor for further share price upside and the lucky companies will continue to outperform those which lack news flow. Average sector PER valuation is raised from 13.2x to 16.6x. Maintain Overweight on the sector, with top picks being Kencana Petroleum, Alam Maritim, Petra Perdana and Petra Energy.
Below are target price for selected companies in Oil & Gas Sector.