Bright prospects for oil, gas companies
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Analysts optimistic of post-election boost
Prospects for oil and gas counters remain bright and are expected to pick up in the second half of the year despite market perception that certain counters may be overbought or expensive as more contracts will be awarded.
The latest set of financial results released by these counters have been mixed as the first three months of the year has usually been a slow period due to monsoon weather patterns, but analysts pointed out that this time around, political risks have also had an impact on the industry.
Alliance Research analyst Arhnue Tan said that the latest quarterly results showed momentum for most of the counters was still slow and would pick up substantially in the second half of the year. Her top pick was SapuraKencana Petroleum Bhd.
“Overall, the industry has been lagging since 2012 up to the 13th general election. We expect more contracts to be dished out going forward,” she said.
Nevertheless, some in the market perceive oil and gas stocks as expensive due to a price rally, with some having hit fresh highs. But Tan said valuation depended on the yardstick used.
“We can see some consolidation in the near term and there will be opportunities to buy on price weakness,” she said, adding that investors could look at some of the laggards like Bumi Armada Bhd and Coastal Contracts Bhd and choose what to buy based on their earnings growth.
Meanwhile, analysts who cover oil and gas stocks remain ”overweight” on them. In fact, following the release of their results, Uzma Bhd and Dayang Enterprise Bhd have been upgraded. They have tweaked their expectations accordingly as Uzma’s net profit for the quarter ending March 31 jumped 61 per cent to 8.9 million ringgit (Bt87.78 million), exceeding their expectations.
The better performance was attributed to the company’s higher operating margins and lower operating costs. Bloomberg data shows that the consensus target price was raised to 3.60 ringgit from 2.57 ringgit before results were released.
As for Dayang, analysts revised the stock’s target price upwards on anticipation that the company could win more jobs as the contracts it bagged to date had met their previous target, bringing the total order book to about 4 billion ringgit.
The company’s quarter to March 31 was within analysts’ expectations and stronger than the preceding corresponding quarter.
Dialog Group Bhd continues to be a stock on the radar of many, with all recent analyst calls showing a “buy” despite missing financial results forecasts for its third quarter ending March 31 due mainly to further provisions for a plant maintenance project in Singapore.
However, this was offset by strong performance for engineering, procurement, construction and commissioning activities at Pengerang, Johor. Analysts expect record earnings for its financial year ending June 30, 2013.
On the other hand, there have been mixed views on Bumi Armada Bhd’s latest set of numbers as the company’s financial performance was only in line with estimates.
