RISING crude oil prices have turned Malaysian oil and gas (O&G) support services firms more optimistic about expanding their order books, amid plans by oil majors to increase spending on exploration activities.
In a note last Friday, CIMB Research said service providers which operated fabrication yards and tank terminals, besides those that offered offshore infrastructures and maintenance services, were expected to benefit under the current landscape.
“We expect the performance of most companies in our O&G portfolio to improve as the year progresses.
The research house, which maintained its overweight call for the Malaysian O&G fraternity, has also retained its stock recommendations and fair values, besides players’ earnings estimates. Among O&G stocks, KENCANA PETROLEUM BHD [ ] is CIMB’s top pick due to the support service provider’s exciting prospects, and rig-building and drilling ventures. These initiatives have placed the firm ahead of its fabrication peers, and on par with established drillers.
“We believe Kencana’s news flow and order book replenishment for the next few months will be exciting. Already over the past few weeks, it has topped up its order book by some RM200 million,” said CIMB, which rated Kencana as outperform.
The stock is deemed fairly valued at RM2.57, a 33.2% upside from the its closing price of RM1.93 last Friday.
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