SKPETRO (5218) : Oil & Gas - overall - Oil lang syne
Recommendation: Over Weight
2014 is not a banner year for the oil & gas sector. We are surprised and disappointed by the sharp falls in the oil price and share prices in 4Q. However, the selling frenzy has thrown up attractive valuations if one takes a longer-term view. 42% of our portfolio has fallen below NTA. We keep our Overweight stance on the sector. We downgrade Petronas Dagangan (PetDag) from Add to Reduce but maintain our calls for other stocks despite removing the 30% premium valuation for the big caps, a move that also affects the small caps. Our top picks remain SapuraKencana and Perdana.
We keep our Overweight stance on the sector. We downgrade Petronas Dagangan (PetDag) from Add to Reduce but maintain our calls for other stocks despite removing the 30% premium valuation for the big caps, a move that also affects the small caps. Our top picks remain SapuraKencana and Perdana.
42% of portfolio below NTA
The share prices of the companies under our coverage have been hammered by an average of 44% YTD. The share prices of five companies that make up 42% of our Malaysian oil & gas portfolio have fallen below NTA, with Perisai trading at the steepest discount of 47%.
3-85% EPS cuts
Our forecasts for Bumi Armada, MMHE, Perdana, PetDag, THHE, Uzma and Wah Seong are intact but we lower our EPS for Alam, Dialog, Perisai, SapuraKencana and UMW-OG. Perisai has the largest cuts as we remove its two idle assets from our forecasts.
58% of portfolio goes for record year
Despite the EPS cuts, 58% of the companies under our coverage are set for all-time net profit highs in CY15. The companies are Bumi Armada, Dialog, Perdana, SapuraKencana, UMW-OG, Uzma and Wah Seong.
Gearing under control
Net gearing for Bumi Armada, Perisai and SapuraKencana is expected to exceed 1x in CY15-17 but their gearing levels are far below their debt covenants, which are net debt/equity of 1.5-1.6x for SapuraKencana and 2.2x for Perisai, and net debt/EBITDA of 9x for Bumi Armada.
30% premium removed
The share prices seem to be aligned with the oil price rather than the fundamentals of the companies. Although we think that the oil price will recover over the longer term, we remove the 30% premium that we attached to the valuations of big-cap stocks given the short-term challenges which could dictate sentiment on the stocks. We now value these stocks at our revised CY16 target market P/E of 15x. We continue to value the small caps at a 30% discount to the big caps.
Source: CIMB Daybreak - 31 December 2014
Recommendation: Over Weight
2014 is not a banner year for the oil & gas sector. We are surprised and disappointed by the sharp falls in the oil price and share prices in 4Q. However, the selling frenzy has thrown up attractive valuations if one takes a longer-term view. 42% of our portfolio has fallen below NTA. We keep our Overweight stance on the sector. We downgrade Petronas Dagangan (PetDag) from Add to Reduce but maintain our calls for other stocks despite removing the 30% premium valuation for the big caps, a move that also affects the small caps. Our top picks remain SapuraKencana and Perdana.
We keep our Overweight stance on the sector. We downgrade Petronas Dagangan (PetDag) from Add to Reduce but maintain our calls for other stocks despite removing the 30% premium valuation for the big caps, a move that also affects the small caps. Our top picks remain SapuraKencana and Perdana.
42% of portfolio below NTA
The share prices of the companies under our coverage have been hammered by an average of 44% YTD. The share prices of five companies that make up 42% of our Malaysian oil & gas portfolio have fallen below NTA, with Perisai trading at the steepest discount of 47%.
3-85% EPS cuts
Our forecasts for Bumi Armada, MMHE, Perdana, PetDag, THHE, Uzma and Wah Seong are intact but we lower our EPS for Alam, Dialog, Perisai, SapuraKencana and UMW-OG. Perisai has the largest cuts as we remove its two idle assets from our forecasts.
58% of portfolio goes for record year
Despite the EPS cuts, 58% of the companies under our coverage are set for all-time net profit highs in CY15. The companies are Bumi Armada, Dialog, Perdana, SapuraKencana, UMW-OG, Uzma and Wah Seong.
Gearing under control
Net gearing for Bumi Armada, Perisai and SapuraKencana is expected to exceed 1x in CY15-17 but their gearing levels are far below their debt covenants, which are net debt/equity of 1.5-1.6x for SapuraKencana and 2.2x for Perisai, and net debt/EBITDA of 9x for Bumi Armada.
30% premium removed
The share prices seem to be aligned with the oil price rather than the fundamentals of the companies. Although we think that the oil price will recover over the longer term, we remove the 30% premium that we attached to the valuations of big-cap stocks given the short-term challenges which could dictate sentiment on the stocks. We now value these stocks at our revised CY16 target market P/E of 15x. We continue to value the small caps at a 30% discount to the big caps.
Source: CIMB Daybreak - 31 December 2014
