CSE Global Limited - OCBC Investment 2017-06-15: Oil Price Seems Unaffected By Gulf Crisis

CSE Global Limited - OCBC Investment 2017-06-15: Oil Price Seems Unaffected By Gulf Crisis CSE GLOBAL LTD 544.SI

CSE Global Limited - Oil Price Seems Unaffected By Gulf Crisis

  • The rising tensions in the Middle East as a result of the Qatar-Gulf rift could post further uncertainties over outlook of oil prices, despite the limited impact we have seen so far. Multiple nations including Saudi Arabia, United Arab Emirates, Egypt, and Bahrain severed ties with Qatar earlier this month, on justifications that Qatar is involved in supporting terrorism. Note that CSE Global Ltd’s (CSE) derived ~35% of its 1Q17 EBIT from the Oil & Gas (O&G) sector.
  • Recall that it was announced late last month that OPEC would extend cuts in oil output until Mar 18, but this agreement could be jeopardized if the crisis results in non-compliance of the output cuts. The result would likely be persistent weak oil prices amid the existing concerns of global supply glut. 
  • Historically, political instability in the Middle East has always resulted in spike in oil prices but such effect was absent this time round.
  • Even while CSE secured two large deepwater O&G projects in 1Q17, which seems to indicate recovery in the industry, we opt to be cautious for now with the on-going Gulf crisis. Hence, maintain HOLD, with an unchanged FV of S$0.45.




Eugene Chua OCBC Investment | http://www.ocbcresearch.com/ 2017-06-15
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.450 Same 0.450



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