Singapore-based brokerage house UOB Kay Hian has listed offshore service providers Ezion Holdings, Triyards Holdings, and Sembcorp Industries as top picks for the offshore and marine (O&M) equity market.
Analysts from UOB Kay Hian have set a target price of SGD1.52 (USD1.12) per share for Ezion, while the company’s stock is currently trading at SGD1.03 per share.
Triyards is projected at a target price of SGD1.05 per share, while its stock is now trading at around SGD0.48 per share.
Lastly, Sembcorp is given a target price of SGD5.10 per share, while its stock is trading at around SGD4.16 per share at this time.
The brokerage house stated that O&M market is facing a lot of challenges amid the oil prices volatility. According to IHS data, offshore supply vessel (OSV) day-rate has declined 2-18% in Southeast Asia since December 2014.
Related news:UOBKayHian recommends ‘buy’ for Ezion’s shares
For instance, large anchor handling tug supply (AHTS) vessels of more than 18,000 brake horsepower (bhp) have suffered the largest decline of 18%, while smaller AHTS vessels of 10,000-15,000 bhp have seen the smallest decline of 3% in day-rates. UOB Kay Hian has modelled an average 15% fall in OSV day-rates on contract renewal if rates have not been cut prematurely.
Meanwhile, the brokerage house also noted that the national oil companies (NOCs) are cutting back on capital expenditure (capex). According to UOB Kay Hian’s survey of the oil companies’ capex since November 2014, the NOCs are implementing an average capex cut of 17% in 2015. Based on channel checks, Indonesian OSV owners are adopting a ‘wait-and-see’ approach as Indonesia’s oil and gas industry continues to experience project delays, following the oil prices’ collapse.
“A cabotage market is a double-edged sword. In good times, local OSV companies enjoy premium OSV day-rates, but in bad times, they find it hard to deploy surplus vessels as they have little or no regional reach,” said UOB Kay Hian.