Apr 20, 2010

Malaysia OIL & GAS Stocks Sector Review

Crude hit by US equities 
Crude oil futures prices were largely range bound during the week,
weakening some 2% towards Friday’s close as US equity markets took a hit and also fuelled by the usual concern of slow recovering demand in the US. At home, stocks across the board were in negative territory led by KNM Group, which announced that the management buyout fell through the floor.

News and views
News to note during the week includes Perisai Petroleum Teknologi Bhd MD and substantial shareholder Nagendran Nadarajah  selling his entire 19% stake in the company to Ezra Holdings Ltd for RM64m. From Ezra’s perspective, the company stated that it offered them recurring income (from the derrick lay barge charter) and also from  other sources it was said that Ezra was looking to inject some of their assets into Perisai, a way to expand their market reach here. Besides this news, Petra Perdana  has so far been successful in securing funding for 3 new vessel deliveries. The company said that they might still fund some of the 6 other deliveries slated for this year through off-balance sheet financing depending on their gearing threshold and of course, availability of bank funding. 

Other news includes Wah Seong signing a Commercial Assistance and Technical Support Agreement with Pipe Coaters Nigeria. The move, we view, serves as a way for Wah Seong to test the waters in Nigeria, the country being plagued with geopolitical problems. While not expected to be revenue yielding in the near term, we believe that there will be more expansion to come through from this region. Also, following up on the Socotherm bid, Wah Seong over the weekend reported that a second bid had been submitted and results would be known end-May. 

On contract news,  Kencana Petroleum  snagged a RM33m service
contract to provide offshore support vessel (OSV) services. The contract comprised the scope of providing an (OSV) for the purpose of assisting and servicing drilling rigs, offshore installations, derrick barges, diving vessels and other crafts, including anchor-handling services off the coast of Vietnam.

Maintain Overweight
We continue to be positive on the sector, seeing a comeback in contract flow as well as M&A news. Top picks are  Wah Seong and  Dayang Enterprises.

klse-oil-gas-stocks above; click to enlarge

source: ECMLibra