OSK is bullish on the O&G industry in the immediate term as it would be very soon before new contracts are awarded, including:
- RM8-10bn worth of hook-up commissioning in the Pan Malaysia cluster
- marginal oilfields
- replacement of expiring brownfield contracts.
OSK’s top picks for the sector is SapuraKencana Petroleum (BUY FV RM3.00), Dialog (BUY FV: RM3.45) and Dayang (BUYFV: RM2.90). They like these companies for their excellent track records and believe that in the event of a slowdown in contract awards, they would still have strong orderbook.
Below are the target prices and ratings for selected Oil & Gas stock.
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Although the market met expectations and rallied to an all-time high closing in March, it may be dogged by some uncertainties and potentially retrace in April.
This, however, has not deterred investors from scouring the market for Election-related BUYs.
For April, OSK Top Buys are stocks with a specific catalyst during the month, namely TNB, which should report improved results this month, MMC with the upcoming listing of subsidiary Gas Malaysia, Kencana with its upcoming merger with SapuraCrest, Dialog which has been a noteworthy laggard and Padini, for which a wider coverage and better liquidity should boost sentiment.
The table below is the target price for OSK’s April 2012 top picks.
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As jobs visibility improves, 2012 should generally be a better year for the Malaysian O&G industry compared to 2011. This year and next year’s focus should still be on marginal oilfields. OSK expects the overlap of marginal oilfield and deepwater activities to boost O&G services providers’ utilization rates to their peaks.
The development of onshore O&G projects would also continue to hog the headlines moving forward.
OSK Maintains Overweight on the sector, with Kencana Petroleum and Dialog Group being the top picks.
Below are the target prices and ratings for selected Oil & Gas stock.
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OSK has a Neutral outlook on the Malaysian market going into 2012 as the combination of uncertain growth outlook in the US and Asia coupled with a possible recession in Europe cloud the prospects for strong earnings growth locally.
OSK advises investors to stay cautious into mid 2012 and focus on Defensive sectors such as Consumer, Telco, Healthcare and Media with KLCI fair value of 1466 pts.
Investors are advised to Trade on Cyclical sectors such as Banks, Oil & Gas and Construction as the market dips or rallies strongly. The trading strategy to adopt is, buy when the KLCI falls towards the 1300 pts and sells when the KLCI rises towards the 1500 pts.
The tables below are OSK’s top Big/Mid/Small Caps Stocks with the target price & rating for 2012.
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The FBM KLCI is a tradable index comprises of the 30 largest companies in the Bursa Malaysia by market capitalization. The index’s component stocks are due for second 2011 revision on 8th December.
Based on the recent data, PLUS and Gamuda are expected to drop from FBM KLCI components. PLUS will be dropped due to privatization.
On the other hand, Gamuda will be dropped because it is now the 37th largest company by market capitalization. This is because as per FTSE regulations, if the counter no longer in the top 35th, it should be dropped from the FBM KLCI.
Based on the table below, to replace PLUS and Gamuda, 3 most likely candidates are Nestle, AirAsia and Bumi Armada.
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