Hey, welcome to my blog again! Hope you all had a great start in the month of October. KLCI had been trending sideways for the past month and frustrated many investors/traders. But don’t worry as we continue to search for the alpha stock for this week.

ICON (5225)

Catalysts

1. New Segment – Offshore Drilling Business

In the announcement dated 2 October 2020, ICON finally announced the acquisitions details of a drilling rig worth USD41.8mil from Perisai Petroleum.

However, it’s worth noting that the offshore drilling contract from Petronas will not be awarded until 2Q2021.

2. Reversion to Sector Mean P/E

Based on peer analysis, the Trailing P/E of ICON at 9.9x is relatively low compared to its sector average P/E of 15.1x. Even at a conservative take profit P/E of 12-13x, there is at least 25% upside to ICON.

Risks

1. Failure to obtain sizeable contracts in Offshore Drilling
2. Increased debt burden
3. Unfavourable oil price

DISCLAIMER: The information above is provided for education purpose only and does not constitute a buy or sell recommendation. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information.