Petronas 2Q'16 net income decreased 96% y.o.y to RM348 million on the back of impairment losses amounting to RM7 billion from its Gladstone LNG Project. Although cost-cutting measures by the group are beginning to yield results on its operating cashflows which improved 64% q.o.q. to RM16 billion - its dividend payout target of RM16b could put a strain. Kong Ho Meng of UOB Kay Hian expects poor earnings visibility for the 2H'16 as Petronas remains selective on award of new contracts. Top pick include Bumi Armada.