Singapore-based brokerage house UOBKayHian has listed offshore service companies Ezion Holdings, Triyards Holdings, and Sembcorp Industries as top picks.
Analysts from UOBKayHian have set a target price for Ezion at SGD1.58 (USD1.20) per share, while the stocks are currently trading at SGD1.23 per share.
Triyards was given a target price of SGD1.05 per share, while its stocks are currently trading at SGD0.50 per share.
Lastly, Sembcorp Industries’ stock target price was predicted to hover around SGD5.20 per share, while its stocks are currently trading at SGD4.73 per share.
The brokerage house cited that the overall shipyard contracts win are very low for the offshore industry. Keppel Corporation (Keppel), one of the bigger player in the offshore market, only managed to secure SGD500 million worth of news contracts while Sembcorp Marine has won none. However, Sembcorp Marine managed to secure a letter of intent to build a crane vessel for the Netherlands-based heavy-lift specialist Heerema Marine Contractors.
“The contract wins of Keppel and Sembcorp Marine are lagging behind our projections of SGD4 billion for 2015,” said the analysts from UOBKayHian.
They claimed that the current market situation reminisce the low contract win levels of SGD1-3 billion seen in the 2009-10 period when the oil price fell below USD40 per barrel.
In the meantime, an austerity drive permeates the entire industry, such as the oil companies, service providers, and shipyards. According to the analysis report from UOBKayHian, the trend is caused by poor earnings visibility in the global oil and gas industry as firms are cutting cost in operation and reduce spending in capital expenditure.