KUALA LUMPUR, Sept 6 — AmInvestment Bank Bhd has upgraded its call on the oil and gas (O&G) sector to ‘overweight’ from ‘neutral’ as prospects have radically brightened with rising asset utilisation globally which supported service providers’ improving results.
In a note, it said the upgrade is despite the continued volatility in the oil price direction exacerbated by the unresolved trade tension between China and the United States, deteriorating global economic growth outlook and easing of US pipeline constraints.
“After four years of low charter rates, recovery in asset utilisation has begun to drive up charter rates for rigs and vessels, in tandem with rising offshore activities.
“Rig charter rates are beginning to track upwards on tightening utilisation rates to near 70 per cent while older rigs are being retired amid slowing new units from China yards,” it said.
Over the longer term, it said offshore projects in Brazil, Mexico, the Middle East and West Africa are poised to gain traction with Sapura Energy Bhd and Malaysia Marine and Heavy Engineering Holdings Bhd being selected for Saudi Aramco’s Long Term Agreement programme, which allows them to bid for the kingdom’s massive offshore projects that could reach US$150 billion over the next 10 years.
On oil price, AmInvestment expects it to range between US$65 and US$70 per barrel this year and next year. Brent crude is trading at just US$60 per barrel currently.
Among its top picks for the sector are Serba Dinamik Holdings Bhd and Dialog Group Bhd.
“We like the recurring income business model of Dialog and Serba Dinamik, which are involved in operation and maintenance services, while Dialog’s earnings visibility is further secured by the Pengerang Deepwater Terminal project with its enlarged buffer zone,” it added. — Bernama
