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Broker's take: CIMB neutral on offshore & marine sector; ST Engineering, Swissco top picks

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With the group's explosive growth and ability to connect the dots à la Ezion, CIMB recommends investors to back the "master".

WITH the oil price down by more than half from its five-year peak in July 2014, the offshore & marine sector is trading at historical lows. CIMB believes that long investors could benefit enormously by taking a position at such historical lows and riding the anticipated rebound in oil prices come H2 2015.

Even though the outlook of the sector has softened, limited risks of a blow-up and valuations at five-year historical lows support CIMB's "neutral" stance. Its top picks remain ST Engineering and Swissco.

CIMB maintains an "add" on ST Engineering with a target price of S$3.93. With US$ strength to support the aerospace division, Europe restructuring over as well as rising electronic orders from infrastructure build-out in Asian cities, CIMB forecast 14 per cent growth in earnings in FY15 for ST Engineering. The company is trading at 18x forward P/E with an attractive dividend yield of about 6 per cent.

CIMB reiterates its "add" on Swissco with a target price of S$1.20. With the group's explosive growth and ability to connect the dots à la Ezion, CIMB recommends investors to back the "master". After all, Ezion's seeds germinated in KS Energy, which was one of the pioneers in rig and liftboat leasing. That essence is now effectively in Swissco following the reverse takeover.

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Based on CIMB's projection of 111 per cent earnings per share growth in FY15 on the back of full-year contributions from the four Ensco rigs, Swissco is trading at 4.4x forward P/E and 0.9x price-book value ratio. Catalysts could come from growth of its rig-fleet to 15 (from nine units) by 2015 and renewal of the four Ensco rigs.

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