Straits Inter Logistics (0080) - Riding on higher OIL PRICES
• The always lagging O&G stock. The company is one of the largest offshore premium oil bunker in companies.
•
The company is direct beneficiary from rising O&G activities in
Malaysia. About 90% of its customers are consists of O&G players, -
PETRONAS, Repsol, Bumi Armada, Alam Maritim, Icon Offshore, just to name
a few.
•
Like Hibiscus, its earnings growth also tied to the oil prices. The
bunker price (MGO and MFO products that the company supply) moves in
tandem with oil prices. The higher the oil prices, the higher bunker
price, the higher its revenue value and earnings value, which would
imply higher EPS and cheaper PE ratio. In fact, the bunker
prices has been trending up since the potential signing agreement
US-China trade deal. Yet, the stock has not reacted to both the US-China
deal and current higher oil prices events!
Investors
have yet realised this. We can expect that Straits’s share price will
likely to skyrocket sooner than later to reflect the higher bunker
prices! You can see the benchmark bunker price chart below or see this link: https://bunkerindex.com/prices/portfreels_xmdo.php?port_id=682
•
The company would also benefit from the migration of residual fuel to
MGO and MFO due to the implementation of IMO’s global sulphur cap,
starting January 2020.
• Maybank has a BUY call on Straits Inter Logistics with a TP of 42sen based on FY20 EPS.
•
The most interesting part, its warrants is only trading at marginal
premium with gearing only 1.8. Normally, the warrants moves double than
the mother share price moves whenever gearing below 2.0.https://klse.i3investor.com/blogs/fatprofitstock/2020-01-06-story-h1482039559-PART_2_My_O_G_stocks_TOP_PICKS_for_6_1_20.jsp
