Except  for  Alam  Maritim,  most  of  the  companies  under  our  coverage reported  earnings  that  were  within  estimates,  while  a  few  were  lower than  expected.  While  Petronas  may  slow  down  on  rolling  out  new contracts,  we  believe  that  the  impact  would  be  greater  on  onshore players as we anticipate offshore activities to remain robust. We retain our OVERWEIGHT call on the oil & gas sector. 
 
- No  major  surprises.  Except  for  Alam  Maritim,  most  of  the  companies under  our  coverage  reported  earnings  that  were  within  expectations, while a few posted lower-than-expected numbers. That said, companies such  as  Wah  Seong,  Petra  Energy  and  KNM  –  whose  results  were below our and consensus forecasts  – may see better results if they are able to secure more contracts or improve on their operations.

- Be selective. Industry sources have it that Petronas may slow down on the  award  of  new  contracts.  We  believe  that  onshore  projects  such  as RAPID would have a higher risk of being delayed but we remain bullish on  offshore  activities  as  Petronas  would  still  need  to  step  up  oil production before Malaysia becomes a net oil importer. Hence, investors need  to  be  selective  when  investing  in  O&G  stocks  and  look  out  for companies with solid orderbook to buffer earnings and which may benefit from upcoming tenders. We prefer the fabricators, offshore asset owners with drilling assets and companies which are marginal oilfields.

- Maintain  OVERWEIGHT.  We  maintain  our  OVERWEIGHT  call  on  the sector, premised on: i) Petronas’ MYR300bn capex from 2011 to 2015, ii)  positive  FY13-14F  earnings  growth  overall,  iii)  anticipation  of  more contracts  being  awarded  in  2H13,  including  transportation  and installation  jobs  from  the  Pan  Malaysia  cluster,  as  well  as  contracts relating to marginal oil fields, and iv) higher oil prices due to the political turmoil in the Middle East, which may spur O&G activities.  

- Our  Top  picks  are  SapuraKencana  Petroleum  for  large  cap  stocks, Dayang  Enterprise  for  mid  caps  and  Alam  Maritim  in  the  small  cap segment.

Source: RHB