Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Oil and gas sector
(Sept 22)
Maintain overweight: We expect a confluence of news flow and corporate activities to excite the oil and gas industry over the next 12 months. Domestic service providers in various parts of the value chain will continue to gain but external risk could upset the fundamental equilibrium.
We see fabricators like Malaysia Marine and Heavy Engineering Bhd (MMHE) and other service providers like Bumi Armada Bhd seizing the spotlight in 2H11 with Uzma Bhd and Petra Energy Bhd enjoying a fair amount of the spillover.
The three major themes that we anticipate for 2011 ' (i) rising order book visibility; (ii) tactical tie-ups and strategic assets; and (iii) increased corporate activities ' have been playing out.
Marginal field risk services contracts (RSC), marine vessels contract extensions, mergers, consolidation, takeovers, and capital raising activities have shaped the sector, leading to a majority of stocks outperforming the market.
We expect the momentum to extend into 2012, driven by Petroliam Nasional Bhd's capital expenditure plans.'' Focus will be on a deep water project and multiple enhanced oil recovery (EOR)/rejuvenation fields with jobs for fabrication works and floating solutions in the pipeline. MMHE and Bumi Armada are among the key beneficiaries with Uzma and Petra Energy reaping a decent share of the gains.
Global economic volatility could clip the fundamental positives and derail the values of companies under coverage. However, with the majority of the local companies on a stronger operational and financial standing, trough valuations akin to 2008 are unlikely. Our stress test suggests'' KNM Group Bhd, Alam Maritim Resources Bhd, Tanjung Offshore Bhd and Perdana Petroleum Bhd are more prone to downside risks. High foreign shareholding stocks like Wah Seong Corp Bhd, Dialog Group Bhd, KNM and MMHE are susceptible to selling pressure should the market turn further south.
Overall, we opine that Malaysia's oil and gas industry is better insulated than its regional peers in terms of new project flows. Domestic projects are driven by national oil company Petronas, which will likely adopt a 'strategic capex approach' as opposed to 'cyclical spending strategy' on energy security concerns.
Against this backdrop, we reiterate our 'buy' calls on Dialog, MMHE, Petronas Gas Bhd (pGas) and Wah Seong, tangibly outperformers in 2011. Our top pick in the sector is MMHE, followed by Dialog, PGas and Wah Seong. ' Maybank Research, Sept 22
This article appeared in The Edge Financial Daily, September 22, 2011.
Company Name: DIALOG GROUP BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 3.35 |
Oil and gas sector
(Sept 22)
Maintain overweight: We expect a confluence of news flow and corporate activities to excite the oil and gas industry over the next 12 months. Domestic service providers in various parts of the value chain will continue to gain but external risk could upset the fundamental equilibrium.
We see fabricators like Malaysia Marine and Heavy Engineering Bhd (MMHE) and other service providers like Bumi Armada Bhd seizing the spotlight in 2H11 with Uzma Bhd and Petra Energy Bhd enjoying a fair amount of the spillover.
The three major themes that we anticipate for 2011 ' (i) rising order book visibility; (ii) tactical tie-ups and strategic assets; and (iii) increased corporate activities ' have been playing out.
Marginal field risk services contracts (RSC), marine vessels contract extensions, mergers, consolidation, takeovers, and capital raising activities have shaped the sector, leading to a majority of stocks outperforming the market.
We expect the momentum to extend into 2012, driven by Petroliam Nasional Bhd's capital expenditure plans.'' Focus will be on a deep water project and multiple enhanced oil recovery (EOR)/rejuvenation fields with jobs for fabrication works and floating solutions in the pipeline. MMHE and Bumi Armada are among the key beneficiaries with Uzma and Petra Energy reaping a decent share of the gains.
Global economic volatility could clip the fundamental positives and derail the values of companies under coverage. However, with the majority of the local companies on a stronger operational and financial standing, trough valuations akin to 2008 are unlikely. Our stress test suggests'' KNM Group Bhd, Alam Maritim Resources Bhd, Tanjung Offshore Bhd and Perdana Petroleum Bhd are more prone to downside risks. High foreign shareholding stocks like Wah Seong Corp Bhd, Dialog Group Bhd, KNM and MMHE are susceptible to selling pressure should the market turn further south.
Overall, we opine that Malaysia's oil and gas industry is better insulated than its regional peers in terms of new project flows. Domestic projects are driven by national oil company Petronas, which will likely adopt a 'strategic capex approach' as opposed to 'cyclical spending strategy' on energy security concerns.
Against this backdrop, we reiterate our 'buy' calls on Dialog, MMHE, Petronas Gas Bhd (pGas) and Wah Seong, tangibly outperformers in 2011. Our top pick in the sector is MMHE, followed by Dialog, PGas and Wah Seong. ' Maybank Research, Sept 22
This article appeared in The Edge Financial Daily, September 22, 2011.
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