MAYBANK Kim Eng has Ezion as its top pick in the offshore and marine sector, and is also advising investors to avoid the rigbuilders who are exposed to capital expenditure cuts, namely Sembcorp Marine and Keppel Corp, in the meantime.
Maybank Kim Eng analyst Yeak Chee Keong, in giving a preview of the earnings season that will start next Thursday, said the impact of the oil rout would not have been fully felt in the last quarter of last year. However, given the uncertainty over whether oil prices have reached the bottom, companies themselves might not be able to size up their prospects accurately, he said in a report.
What will be of interest in the coming earnings season would be the companies' strategies, industry pricing, order enquiries and order-win potential, said Mr Yeak.
"We expect most to initiate some form of cost-cutting to mitigate pricing pressures and lower utilisation. Substantial labour retrenchments or permanent capacity rationalisation may signal expectations of a prolonged downturn," he said.
No company will be safe from the oil price rout, in his view. "We see vulnerability in the entire value chain given the extent of oil's price fall and the uncertainties surrounding its recovery."
For asset owners, pricing and utilisation will matter the most at this stage in the cycle, while backlogs and quality will be the most important for asset builders, he added.