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BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Friday, 20 July, 2012

Sector Update

Overweight Oil & Gas Sector Update


Unleashing More
North Malay Basin. With the conclusion of the 3 PSCs between Hess and Petronas for the development of the much awaited USD5.2bn North Malaysia Basin high CO2 content marginal gas fields, attention is now switched to the award of contracts. Specifically, with first gas through Early Production System (EPS) targeted to come on stream by 1Q 2013, we are expecting almost immediate requirements for fabrication, drilling, mobile production units, pipe coating (tender will be issued out soon), OSV and floating solution (awarded to Emas Offshore). While over a longer term, comprehensive Full Field Development (FFD) would offer more robust demand for fabrication (at least 7 new platforms of various size are required), process equipment, OSV, installation, hook-up and commissioning services as well as construction works for onshore facilities. Hess has indicated its net investment in FY12 for the project to be around USD250m and to pick up to USD400m p.a for 2013-15, suggesting prospective increase in contract flows. On KBM Cluster. With an estimated development cost of approximately USD1bn , the project is now in an exciting phase as Coastal Energy is seeking for a local company to participate up to 40% in the project with Petra Energy touted as the front runner, a speculation that further spice up the recent acquisition of 26.9% stake by Wah Seong. While Coastal Energy has yet to disclose the clusters full development scheme, announcement by the company which has pointed towards utilization of MOPUs and FSO are positive for local service providers though we wish to highlight that from the development of Berantai and Balai marginal fields, RSC players seems to prefer to own some of these assets rather than entering into leasing arrangement with third party solution providers. As for the remaining 5 cluster of marginal fields, we see SapuraKencana, Dialog and Bumi Armada as the major hopefuls. More risk to our FY12 numbers. While we continue to favour domestic oilfield services sector which mainly derived its strength from Petronas capex fire round and expect 2H to be a more vibrant vis-a-vis the 1H, slower than expected contract award continue to challenge our short term estimates particularly amongst the big boys. Our target price for Uzma has been adjusted from RM2.70 to RM1.80 subsequent to the recent 1-for-2 bonus issue, still our top call for small cap exposure.
Chiong Tong Chai chiongtc@bimbsec.com.my 03-26918887 ext 175

View and recommendation. We continue to Overweight the sector. Maintain Buy on Dayang (TP: RM2.43), Dialog (TP: RM2.78), Uzma (TP: RM1.80) while Trading Buy on Wah Seong (TP: RM2.28), Neutral on Bumi Armada (TP: RM4.44) and Sell on MMHE (TP: RM4.37).
Core Net Profit (RMm) FY11 FY12 FY13 FY11 PER (x) FY12 FY13 FY12 Div Yield (%) ROE (%) Target Price (RM) Rating

Companies

Price (RM)

Market Cap (RMm)

Bumi Armada Dayang Dialog MMHE Uzma Wah Seong

3.98 2.00 2.46 5.46 1.36 1.98

11,655 1,100 5,919 8,736 180 1,534

359.7 83.9 152.3 205.6 12.1 110.4

564.8 92.3 176.5 349.7 23.8 115.0

718.5 109.2 213.0 389.6 31.7 130.9

32.4 13.1 38.9 42.5 14.9 13.6

20.6 11.9 33.5 25.0 7.6 13.0

16.2 10.1 27.8 22.4 5.7 11.5

1.0% 2.5% 1.3% 0.4% 2.0% 3.5%

24.3% 15.7% 15.2% 12.8% 24.2% 10.7%

4.44 2.43 2.78 4.37 1.80 2.28

Neutral Buy Buy Sell Buy T.Buy

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20 July 2012

Sector Outlook: Oil & Gas (Overweight)

Corporate Activities June 12


Date Company Nature Asset Acquisition Award of Contract Award of Contract Award of Contract Asset Acquisition Business Acquisition Remarks Acquired an accommodation work barge via a jointly controlled company for RM64.7m to serve a contract by ExxonMobile. Entered into consortium agreement with PTSC for EPCI and bareboat charter contract for an FPSO worth USD516m (firm) and USD221m (option), hold 49% interest. Awarded a 3+1 contract for provision of integrated water injection studies worth RM36m from Petronas Carigali. Awarded fabrication contract worth RM177.5m from Shell Sarawak for D12DR-A and LADR-A development projects off Sarawak. Issued LOI to Nam Cheong to build 4 units of DP2 Multi-Purpose Platform Support Vessels with a call option of further 4 units at USD130m. Announced the successful bid for 26.9% stake in Petra Energy. Subsequent update has put the pricing at RM1.69 per share. Entered into MOU with Halliburton Energy cooperates to pursue projects and/or opportunities in the re-development of mature oil fields in Malaysia. Awarded fabrication contract worth RM278m from Shell Sarawak for F14/F29 fields off Sarawak. Awarded a 2+1 charter contract for an AHTS worth RM86m from Murphy Sabah/ Sarawak. Signed a Participation Agreement committing to establish a Joint Venture Company for the purpose of undertaking the development of certain identified marginal fields with Hydra Energy.

04/06/2012

Alam Martim

11/06/2012

Yinson

11/06/2012

Uzma

14/06/2012

TH Heavy

20/06/2012

Bumi Armada

21/06/2012

Wah Seong

22/06/2012

Dialog

MOU

27/06/2012

MMHE

Award of Contract Award of Contract

28/06/2012

Perdana Petroleum

27/06/2012

Daya Materials

Incorporation of Business

Contract Secured YTD June 12 Company SapuraKencana Bumi Armada Yinson Uzma MMHE Others Total Contract Value (RMm) 2,637.9 1,065.0 758.7 386.0 278.0 737.7 5,863.3

Contract Secured YTD By Markets

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20 July 2012

Sector Outlook: Oil & Gas (Overweight)

On-going bidding highlights


Tender by ExxonMobile Malaysia Carigali Hess Descriptions Contract for fabrication of a wellhead platform weighing below 4k tonnes for Damar gas development. Contract for fabrication of a gas compression platform weighing 25k tonnes for Block A-18. Hyundai Heavy Industries is reportedly the most competitive bidder with bid valued around USD400m. Front-end engineering and design contract for Malaysias second floating liquefied natural gas vessel. Potential players MMHE is reportedly set to clinch the contract with contract valued at RM200m. Other contenders include MMHE, SapuraKencana, SOME, Larsen & Toubro and Nippon Steel.

Petronas

As the FEED for FLNG is a new for local engineering outfits, the competition only involve three foreign consortiums lead by JGC, Toyo Engineering and Technip. MISC, Bumi Armada, SapuraKencana

Petronas

Contract to supply the worlds first Chemical EOR vessel for Angsi field. MISC has been approached for the contract which means other keen players likely to be disappointed.

O&G Stocks Share Price Performance

Source: Bloomberg, BIMBSec

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20 July 2012

Sector Outlook: Oil & Gas (Overweight)

Crude Price Spot Brent

source: Bloomberg, BIMBSec

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20 July 2012

Sector Outlook: Oil & Gas (Overweight)

DEFINITION OF RATINGS BIMB Securities uses the following rating system: STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

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