But mod­est re­cov­ery al­ready re­flected in mar­ket value of shares un­der cov­er­age, say HLIB

New Straits Times - - Business -


HONG Leong In­vest­ment Bank Bhd (HLIB) ex­pects 2017 to be a bet­ter year for oil and gas (O&G) stocks, but says a mod­er­ate re­cov­ery in the sec­tor seems to have been priced in by in­vestors at the cur­rent level.

HLIB also does not an­tic­i­pate a ma­jor cap­i­tal ex­pen­di­ture (capex) up­cy­cle by Petroliam Na­sional Bhd (Petronas) this year due to the lin­ger­ing un­cer­tainty in oil prices.

Im­prove­ments in the sec­tor had al­ready been re­flected in the mar­ket value of stocks un­der its cov­er­age, it said in a note.

HLIB said Petronas’s core net profit (ex­clud­ing as­set im­pair­ments) rose 79.4 per cent year-on-year to RM15.1 bil­lion last year, mainly at­trib­uted by bet­ter up­stream per­for­mance due to higher gas pro­duc­tion and sales and im­proved down­stream con­tri­bu­tion on higher in­ter­na­tional re­fin­ing and mar­ket­ing mar­gins.

Petronas spent RM59.4 bil­lion last year mainly on do­mes­tic up­stream ex­plo­ration and pro­duc­tion (E&P) projects, the Re­fin­ery and Petro­chem­i­cal In­te­grated Devel­op­ment (Rapid) and the Sabah Am­mo­nia Urea projects.

The amount was down by 22.1 per cent due to a re­duc­tion in do­mes­tic up­stream capex.

“At this junc­ture, the group is slightly over mid­way through the progress of US$29 bil­lion (RM129 bil­lion) Rapid project with tar­geted op­er­a­tional start-up in the first quar­ter of 2019,” it said.

HLIB said Petronas’s re­cent deal with Saudi Aramco to in­ject US$7 bil­lion into the project would help re­lieve its cash­flow com­mit­ments.

“Our back of the en­velop cal­cu­la­tions

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