o&g services - jason saw dmg partners

7/29/2019 O&G Services - Jason Saw DMG Partners

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Oil & Gas ServicesStocks are up. Should you buy?

Jason Saw

Head of Regional Offshore & Marine

T: +65 6232 3871

DMG & Partners Research

8 June 2013


2/18

Positive on the ASEAN oil & gas services sector

Crude oil prices at USD90-110/bbl are positive for spending.

Petronass MYR300bn capex plan will drive news flow.

Regional earnings growth: 5%/14% growth in FY13/FY14. Malaysia names

projected to see stronger growth of 15%/21%.

Regional valuations: 15.9x FY13F P/E and 13.9x FY14E P/E. Malaysian

names trade at 45-60% premium to Singapore names due to stronger

earnings growth.

Summary

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3/18

The Big Picture

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4/18

From Exxon Mobil:

Global energy demand rising 30% in 2040 vs 2010 supported by 9bnpeople and doubling of global GDP.

Non-OECD demand will rise by 60% while demand in OECD countriedwill remain flat.

Electricity demand will be the biggest driver, accounting for 40% ofglobal energy consumption.

Coal demand will decline due to policies to curb emissions.

Natural gas will overtake coal. Supply growth will come from thedevelopment of shale gas.

LT trend is clear Energy demand will rise

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5/18

Global Demand Growth Driven by Non OECD

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Source: Exxon Mobil Energy Outlook 2012-2040


6/18

Capex Supported by High Crude Prices

Prices have stayed flat but remain supportive of E&P capex expansion.

Oil prices at USD97/bbl (WTI) and USD104/bbl (Brent) are supportive ofthe capex spending by oil majors and national oil companies.

Petronas commitment to spend MYR300bn in 2011-15 to lift domesticexploration & production activities is creating plenty of excitement.

Brent crude oil prices remain strong Prices have remained stabled for the past two years

Source: Bloomberg Source: Bloomberg, OSK-DMG Estimates

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28 25 25 2838

5566

73

98

63

80

111112

109

0

20

40

60

80

100

120

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YTD1

3

USD/bbl

-13

1

13

34

45

2010

35

-36

2838

1

-2

-50-40

-30-20-10

01020304050

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YTD1

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Growth (% y-o-y)


7/18

Population, income growth underpin demand

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Source: BP Statistical Review 2012

50,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

90,000

0

200

400

600

8001,000

1,200

1,400

1,600

1,800

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

'000 bbldbn barrels Proven Oil Reserves Oil Production Oil Consumption


8/18

Oil & Gas Deepwater Development

Onshore and Offshore Production

Source: Offpex (Infield Systems)

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9/18

Discoveries getting deeper; more complex jobs

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Source: Clarksons


10/18

Stock Selections

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11/18

In periods of rising and declining crude oil prices, share prices

have strong correlation with crude prices. However, when crude oil prices are stable, investors should

focus on stock picking with focus on valuation and earnings.

Malaysian names trade at premium to regional names butvaluation premium justified by cabotage ruling and robustlocal spending environment.

Conclusion of the election in Malaysia brings better spendingclarity. No major policy changes to the oil & gas sector.

Stock Trends

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12/18

Spin-offs of oil & gas firms will provide catalyst to the market.

Award of more marginal fields by Petronas. Pick-up in vessel sales and newbuild contracts for drilling rigs.

Major events in the next 6-12 months

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13/18


14/18

Recommendations: Singapore coverage

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Source: Share prices as at 4 Jun 2013, OSK-DMG Estimates, Bloomberg

CompaniesMkt cap(USDm)

Lastprice Rating TP Upside

Pros-1P/E (x)

Pros-2P/E (x)

Pros-1

EPS

growth(%)

Pros-2

EPS

growth(%)

Pros-1yield (%)

Keppel Corp 15,215 SGD 10.57 Neutral 11.21 6 14.1 13.1 -30 7 4.3%

Sembcorp Marine 7,257 SGD 4.36 Neutral 4.65 7 16.3 14.5 3 12 3.4%

Sembcorp Industries 6,974 SGD 4.90 Buy 5.85 19 11.4 10.3 2 10 3.1%

Yangzijiang 2,640 SGD 0.87 Neutral 0.95 10 5.9 7.2 -24 -19 5.1%

Ezion Holdings 1,726 SGD 2.25 Buy 3.00 33 14.2 8.5 65 67 0.0%

VARD Holdings 1,123 SGD 1.20 Buy 1.69 41 8.6 8.2 -15 5 3.7%

Ezra Holdings 784 SGD 1.01 Neutral 1.15 14 42.4 16.4 16 159 1.5%Nam Cheong 477 SGD 0.29 Buy 0.35 23 7.9 7.0 22 14 2.5%

Jaya Holdings 372 SGD 0.61 Sell 0.55 -9 12.6 9.0 -33 39 1.7%

Technics Oil & Gas 156 SGD 0.84 Sell 0.64 -24 31.1 14.0 -72 122 0.0%

AusGroup 167 SGD 0.44 Sell 0.35 -20 16.4 12.9 -56 28 0.0%

MTQ Corp 128 SGD 1.61 Buy 2.20 37 5.9 5.1 19 15 3.1%

XMH Holdings 141 SGD 0.46 Buy 0.40 -13 15.8 12.6 18 25 2.8%

Marco Polo Marine 109 SGD 0.40 Buy 0.61 53 6.7 5.2 20 29 2.0%


15/18

Recommendations: Malaysia coverage

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Source: Share prices as at 4 Jun 2013, OSK-DMG Estimates, Bloomberg

CompaniesMkt cap(USDm)

Lastprice Rating TP Upside

Pros-1P/E (x)

Pros-2P/E (x)

Pros-1

EPS

growth(%)

Pros-2

EPS

growth(%)

Pros-1yield (%)

Petronas Chemicals 17,411 MYR 6.73 Neutral 6.40 -5 15.3 12.6 0 21 4.0%

Petronas Gas 13,565 MYR 21.20 Neutral 18.53 -13 27.9 26.1 7 7 2.5%

SapuraKencana Petroleum 8,100 MYR 4.18 Buy 4.96 19 23.2 18.5 105 25 0.0%

Bumi Armada 3,790 MYR 4.00 Buy 4.40 10 25.4 20.0 19 27 0.8%

Dialog 2,331 MYR 3.00 Buy 3.16 5 40.5 33.0 9 23 1.0%

MMHE 1,790 MYR 3.46 Neutral 3.70 7 21.2 16.8 8 26 2.9%

Dayang 910 MYR 5.12 Buy 6.50 27 17.2 11.8 62 46 2.9%Perisai Petroleum 488 MYR 1.61 Buy 1.81 12 15.1 10.6 9 43 0.0%

Wah Seong Corp 477 MYR 1.91 Buy 2.50 31 15.9 10.8 76 47 3.9%

Alam Maritim 370 MYR 1.45 Buy 1.65 14 14.9 12.6 28 17 0.0%

Coastal Contracts 344 MYR 2.20 Neutral 2.33 6 8.3 7.5 8 10 2.7%

Perdana Petroleum 312 MYR 1.95 Neutral 1.75 -10 21.4 16.0 nm 34 1.5%

KNM 249 MYR 0.53 Sell 0.42 -20 10.9 7.4 45 48 0.0%

Petra Energy 214 MYR 2.06 Neutral 2.34 14 29.0 14.7 209 97 0.7%

Favelle Favco 170 MYR 2.47 Buy 3.35 36 7.4 6.5 15 13 3.4%


16/18

Decline in crude oil prices

Over expansion of offshore assets

Project delays

Accidents and HSE issues

Key risks

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17/18

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Q&A


18/18

DISCLAIMERS

This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to

the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. Youshould independently evaluate particular investments and consult an independent financial adviser before making anyinvestments or entering into any transaction in relation to any securities or investment instruments mentioned in this report.

The information contained herein has been obtained from sources we believed to be reliable but we do not make anyrepresentation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions andviews expressed in this report are subject to change without notice.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities.

DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture betweenOSK Investment Bank Berhad, Malaysia (a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific HoldingsPte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore ExchangeSecurities Trading Limited.

DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effecttransactions in the securities covered in the report, and may also perform or seek to perform broking and other corporatefinance related services for the corporations whose securities are covered in the report. This report is therefore classified as anon-independent report.

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