Oil & Gas Sector

O&G

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.

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Continue to see the market rallying on 3 Factors. After rising more than 20% at its highest in 2010, we still see the Malaysian market rallying to new highs in 2011 with our KLCI fair value at 1648 points.

We believe this rally will be driven by 3 key factors:

  1. Still respectable Earnings at 16% growth for 2011 with most sectors expected to record at least 10% growth. Banks and Domestic consumption driven sectors such as Aviation, Healthcare and Property should see decent quality earnings with little downside surprises. We expect earnings surprises and upgrades to support the market in 2011.
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stock market

Buy for 2011. For December, we would advise investors to return to the market to position for a potential rally in 1H2011. We note that December had indeed been a good month since 1996, posting positive returns 86% of the time. We are, for December, inclined towards the Big Caps, with our Top Banking and Telco sector Buys again being CIMB, Maybank and Axiata. Our Top Buys for December include stocks from the Property and O&G sectors.

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