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01-12-2014, 03:34 PM
To balanced out the view. Here is analyst report with "BUY".
(not vested, but with a neutral rate on Keppel)
Keppel and Ezion get buy calls from OCBC
SINGAPORE (Dec 1): With oil prices remaining volatile, oil & gas companies with strong balance sheets to weather any downturns remain a favourite with OCBC Investment Research.
In a Dec 1 report, analyst Low Pei Han says investors should go for those with exposure to higher quality customers and a significant outstanding order book as these companies should also be more resilient. The house is recommending a ‘buy’ on Keppel Corporation ( Financial Dashboard) and Ezion Holdings ( Financial Dashboard) while maintaining ‘neutral’ in the overall sector.
OCBC says it had been relatively positive at the start of this year with an overweight rating on the broader oil and gas sector. The FTSE Oil and Gas index saw some volatility in Jan, but recovered in the subsequent months such that the index traded pretty much range-bound in the first eight months of the year.
However, since then, OCBC has downgraded the sector to Neutral on 2 Sep 2014, and the FTSE Oil and Gas index has lost about 20% of its value. At current levels, valuations are not demanding and the house does not see strong re-rating catalysts in the near term. Meantime, it does not see a significant oil price recovery till perhaps 2H15, which is when it sees the impact of production cuts.
Looking ahead, OCBC sees the risks are actually tilted more to the downside. For one, oil price volatility would affect the rate at which projects are being awarded, compounded by the renewed focus by international oil companies on shorter term shareholders’ returns. There is also the possibility of a credit crunch should the short-term outlook deteriorate.
In addition, there are several highly indebted companies in the industry, and it is imperative that they have a favourable debt maturity profile in view of rising interest rates and a likely subdued oil price environment, says the house. Those that are operating in segments of the industry with relatively high breakeven costs are more at risk, and should be monitored more closely.
Still, OCBC believes that the offshore sector has strong long-term fundamentals. But “equity investors are generally a jittery lot” so stepping into 2015, it would rather favour companies with strong balance sheets to weather any downturns. As such, investors keen to have an exposure to this sector may want to consider Keppel and Ezion with fair values of $9.89 and $2.04 respectively.
Keppel is down 3% at $8.73 while Ezion is down 11.7% at $1.17 as at 12:46 p.m. local time.
http://www.theedgemarkets.com/sg/article...calls-ocbc
(not vested, but with a neutral rate on Keppel)
Keppel and Ezion get buy calls from OCBC
SINGAPORE (Dec 1): With oil prices remaining volatile, oil & gas companies with strong balance sheets to weather any downturns remain a favourite with OCBC Investment Research.
In a Dec 1 report, analyst Low Pei Han says investors should go for those with exposure to higher quality customers and a significant outstanding order book as these companies should also be more resilient. The house is recommending a ‘buy’ on Keppel Corporation ( Financial Dashboard) and Ezion Holdings ( Financial Dashboard) while maintaining ‘neutral’ in the overall sector.
OCBC says it had been relatively positive at the start of this year with an overweight rating on the broader oil and gas sector. The FTSE Oil and Gas index saw some volatility in Jan, but recovered in the subsequent months such that the index traded pretty much range-bound in the first eight months of the year.
However, since then, OCBC has downgraded the sector to Neutral on 2 Sep 2014, and the FTSE Oil and Gas index has lost about 20% of its value. At current levels, valuations are not demanding and the house does not see strong re-rating catalysts in the near term. Meantime, it does not see a significant oil price recovery till perhaps 2H15, which is when it sees the impact of production cuts.
Looking ahead, OCBC sees the risks are actually tilted more to the downside. For one, oil price volatility would affect the rate at which projects are being awarded, compounded by the renewed focus by international oil companies on shorter term shareholders’ returns. There is also the possibility of a credit crunch should the short-term outlook deteriorate.
In addition, there are several highly indebted companies in the industry, and it is imperative that they have a favourable debt maturity profile in view of rising interest rates and a likely subdued oil price environment, says the house. Those that are operating in segments of the industry with relatively high breakeven costs are more at risk, and should be monitored more closely.
Still, OCBC believes that the offshore sector has strong long-term fundamentals. But “equity investors are generally a jittery lot” so stepping into 2015, it would rather favour companies with strong balance sheets to weather any downturns. As such, investors keen to have an exposure to this sector may want to consider Keppel and Ezion with fair values of $9.89 and $2.04 respectively.
Keppel is down 3% at $8.73 while Ezion is down 11.7% at $1.17 as at 12:46 p.m. local time.
http://www.theedgemarkets.com/sg/article...calls-ocbc
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