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KGI Trading Ideas - Rotational interest in oil and gas, Dyna-Mac Holdings

Shared By Stock Fanatic on Thursday, February 1, 2018 | 1.2.18

We are seeing rotational trading among the local small-mid cap oil & gas companies. Stocks such as Mermaid Maritime and KimHeng Marine have gained 20-40% over the past two weeks. Even big caps like Keppel Corp and Sembcorp Marine have gained 14-40% year-to-date, and that's just one month into the new year!

Today, we are seeing trading interest shift to Dyna-Mac Holdings (DHML SP). It is still cheap, trading at -1SD below its 7-year P/B average. It also announced a new director two days ago from Keppel Corp, which we think may signal more collaboration between the two companies.

There could be several drivers for interest in the small-mid cap oil & gas stocks. Funds are scooping up bargains, buying up assets for 10% of their pre-crisis prices. Business Times also reported this morning that one of Temasek's units may be taking a stake in Marco Polo, a distressed oil & gas firm, as well as a potential capital injection into Ezion. We continue to reiterate our bullish view on the Oil & Gas sector and believe we are just at the start of a multi-year bull run in the sector.

Figure 1: Dyna-Mac’s current P/B still near -1SD below its 7-year average.
Source : Bloomberg

Figure 2: Dyna-Mac's share price has broken its 6-months resistance level. We continue to expect rotational interest among local small-mid cap oil & gas names.
(Source: KGI CONNEX)

Posted on Thursday, February 1, 2018 | 1.2.18
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