Downstream Players Largely Underperformed against Estimate
1Q22 results saw all upstream companies under our coverage recorded earnings that were largely within our expectation though a contrast for downstream players. Petrochemical players’ margin was still under threat of new capacity coming from the US, albeit partially cushioned by logistic constraint. Though PetDag was affected by the sharp increase in oil prices given its recent disposal of working and deadstock inventory to sister company PETCO to cause the company to incur higher product cost in a volatile oil price environment - this may however normalise in coming quarters.
Maintain OVERWEIGHT call on the sector
Maintain OVERWEIGHT call on the Oil and Gas sector with average Brent forecast of USD85-90/bbl in 2022 (YTD: USD102.7/bbl) with the call premised on the uptick in oil and gas offshore capex spending. With the reopening in economies around the world, we think the government’s coffers will be improving and therefore, reduce the need for extra contribution from Petronas (i.e., special dividend). As such, we believe Petronas will be accelerating its capex spending in 2H2022 to c.RM40-50bn (1Q2022: RM7.4bn). For comparison, this is largely similar to pre-covid level (average 2020/21: RM30-35bn) though fall short of RM60bn when the oil prices peaked above USD100/bbl in 2014/15.
Sector top pick; Velesto (TP: RM0.28)
Velesto (BUY, TP: RM0.28) is our top pick as we are optimistic on its turnaround story owing to (i) recovery in Petronas’ capex, (ii) recovery in daily charter rate (DCR) due to tight supply and (iii) improving utilisation rate with foreign contract. We believe these factors will push its stock price in the near term. Besides that, we also have a BUY call on MMHE (TP: RM0.65), MISC (TP: RM8.10) and Sapura Energy (TP: RM0.15).
Source: BIMB Securities Research - 7 Jun 2022
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2024-07-22
MHB2024-07-22
MISC2024-07-22
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SAPNRG2024-07-19
MISC2024-07-19
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MISC2024-07-18
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MISC2024-07-17
MHB2024-07-17
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VELESTO2024-07-16
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SAPNRG2024-07-15
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SAPNRG2024-07-15
VELESTO2024-07-12
MISC2024-07-12
MISC2024-07-12
MISC2024-07-12
MISCCreated by kltrader | Jul 17, 2024
Created by kltrader | Jul 17, 2024
Created by kltrader | Jul 17, 2024