Research reports and recommendation by OCBC released on 22-May-2015.
Many oil and gas stocks saw a rally in early Apr as oil prices were supported by geopolitical tensions in the Middle East, and investors also took to bargain hunting with depressed valuations of stocks in the sector. This rally lasted about two to three weeks, and the momentum has fizzled out for now. On the operational front, many companies continued to see deterioration in outlook and business profitability. Unsurprisingly, 1Q15 had many companies reporting earnings that were lower versus a year ago, and many were in fact below ours and the street’s expectations. In the Offshore Support Vessel (OSV) segment, vessel owners are prioritizing utilisation rates over charter rates while yards seek to defend their existing order books. So far, the most resilient in terms of earnings has been Ezion Holdings [BUY, FV: S$1.55], and the liftboat segment is still one of the relatively brighter spots of the sector in terms of demand. As such, investors may also want to consider Triyards Holdings [BUY, FV: S$0.60]. Maintain NEUTRAL on the broader sector.
Source: http://www.ocbcresearch.com/
