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UOB Kay Hian says Ezion Holdings is its top stock pick in the Singapore oilfield services sector.
It maintains a "buy" call on the offshore services provider with a target price of S$1.55, despite the company having five charter contracts that will expire in 2015.
"Apart from one service rig (unit number 9), management does not expect rate cuts on re-contracting. The downturn of the exploration and production (E&P) industry is fast and furious with an austerity drive permeating across the entire industry.
"However, we expect investors to differentiate stocks as companies report the extent of the negative impact," said UOB.
It added that it forecasts an average Brent oil price of US$65 per barrel for 2015 and US$70 per barrel in the longer term.
"Our regression analysis of past cycles suggests US$70 per barrel for Brent oil, and the one-year forward price earnings of Singapore offshore support vessel-owner segment is 6.2x. Given Ezion's locked-in long-term vessel charters and its positioning in shallow-water production, we value it at a higher 2016 forecast price earnings of 7x."