MaybankTV: Singapore Offshore & Marine - Worst is not over

MaybankTV interviews Yeak Chee Keong, Investment Analyst at Maybank-KE, who shares his insights on the Singapore offshore and marine sector.

Key stocks – Ezion, Pacific Radiance, SMM, Vard, Cosco, Swiber, Keppel Corp and Sembcorp Marine.

Maybank-KE is in no hurry to turn positive on the O&M sector despite heavily discounted stocks, and would rather select oversold stocks that can justify early fundamental long positions than calling the oil-price cycle outright.

Prefers maintenance providers and OSV owners, especially those with fleets that could benefit from ongoing oil production, as these players are also more likely to lead a cyclical rebound, but selection is key as over-leveraged and weak players may not hold out.

Avoid rig builders due to their high exposure to capex and offshore drillers.

Stock picks:
1) Ezion (Buy, TP cut to $1.55 from $1.57) – resilient opex exposure and liftboat growth potential.

2) Pacific Radiance (Buy, TP cut to $0.80 from $1.00) – competitive cost structure and assets should help it emerge a winner from OSV consolidation.

Stocks to avoid:
1) Keppel Corp (Hold, TP: $8.50) and Sembcorp Marine (Sell, TP $2.45) – capex sensitive laggards, and faces rig oversupply even if oil rallies.

2) Swiber (Hold, TP: $0.17), Vard (Sell, TP cut to $0.35 from $0.40) and Cosco (Sell, TP $0.43) – too highly leveraged and/or faces operational and execution challenges.

Source : Maybank TV

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