Brokers' take

PACC Offshore Services Holdings | Buy Target price: S$0.42 Feb 22 close: S$0.355 DBS Group Research, Feb 22

SENTIMENT for oil services stocks should improve as we see more evidence of an inflexion point in oil majors' capex plans - some oil producers have already surprised on the upside (for example ExxonMobil and CNOOC increasing 2017 capex by 14 per cent and 20-30 per cent year on year respectively).

A ramp-up in activity at cheaper onshore regions (for example US shale) should lead the recovery, but we believe an offshore activity recovery is also showing green shoots. We have seen the offshore working rig count increase in February 2017 for the first time since July 2014 (albeit only slightly). Thus, despite a still-dismal Q4 2016, we expect a gradual earnings recovery in 2018.