ROUGH SEAS AHEAD FOR O&G FIRMS?
Dialog, Serba Dinamik most likely to weather tough times, say analysts
DIALOG Group Bhd and Serba Dinamik Holdings Bhd could be the most resilient oil and gas (O&G) companies amid a slowing global economy and plunging oil prices.
Analysts said Dialog and Serba Dinamik were proven names, given their ability to deliver earnings growth despite the harsh macro environment.
Affin Hwang Investment Bank Bhd analyst Tan Jianyuan said Dialog could be a prime beneficiary of the low oil price environment, given the expected higher demand for storage space.
Serba Dinamik could benefit from higher maintenance demand in the Middle East following the increase in oil production, said Tan.
He said Serba Dinamik’s order book target of RM15 billion by year end remained intact, especially with the Pengerang Integrated Complex in Johor starting operations.
Meanwhile, companies with upstream exposure such as Hibiscus Petroleum Bhd, Sapura Energy Bhd and Petra Energy Bhd would be the losers in a low oil price environment, said Tan.
JF Apex Securities Bhd research analyst Lee Cherng Wee said upstream players were more likely to be affected by low oil prices as it meant reduced revenue for oil producers.
“The whole industry will be affected as the lower oil price discourages further exploration and investment, meaning fewer jobs and contracts for industry players.”
Lee said those providing maintenance and oil storage would be the least affected as these services would be needed.
Affin Hwang’s Tan said Petronas Dagangan Bhd would likely be impacted by lagged inventory losses, while Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) and rig player Velesto Energy Bhd would be affected as they were capital expenditure dependent.
“MHB’s current order book is sustainable for the next couple of years. But Sapura Energy’s engineering and construction and drilling segments could be affected by a lack of new wins.
“Velesto Energy has four rigs up for renewal with Petronas Carigali Sdn Bhd in the secondhalf of this year but those are now at risk of being renewed at lower rates, though it was unlikely to face early contract termination,” he added.
Nearly all 44 O&G-related counters were in the red yesterday as Bursa Malaysia tumbled 74.68 points, or 5.25 per cent, to 1,344.75, the lowest level since 2010.
Sapura Energy, Velesto and Hibiscus Petroleum were among Bursa’s top five most active stocks.
Sapura lost 4.55 per cent to 10.5 sen, Velesto shed 5.88 per cent to 16 sen and Hibiscus Petroleum declined 6.25 per cent to 37.5 sen.
Dialog eased 1.54 per cent to RM3.20 while Serba Dinamik fell 4.97 per cent to RM1.72.