Broker's Take: Ezion top pick in Singapore oilfield services sector, says UOB Kay Hian
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."
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Capital Markets & Currencies
Europe: Stoxx ends lower as auto giants weigh; investors parse inflation data
US: Wall Street stocks fall as markets weigh strong wage data, Fed meeting
Japan may have spent 5.5 trillion yen on Apr 29 intervention, BOJ data suggests
Singapore stocks rise, tracking regional bourses; STI up 0.3%
Asia: Markets build on Wall Street rally, yen holds bounce
Singapore shares open in the red on Tuesday; STI down 0.3%