HLIB Research neutral on O&G, top picks DNeX, Wah Seong

KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research, which maintained a “neutral” call on the oil and gas sector, still thinks that 2023 will be a golden year for the oil and gas service providers (OGSE players) – a laggard to the elevated oil price environment for the past year.

“However, we are also wary of cost hikes that are currently demonising the oil and gas services and equipment (OGSE) space due to cost inflation woes amidst the heightened oil and gas demand with global supply chain disruptions – impacting the availability of oilfield equipment and spares,” the research house said.

Its top picks for the sectors are Dagang Nexchange (DNeX) and Wah Seong.

HLIB believes the worst may already be over for DNeX. It is also wagering on a positive outcome for the ongoing arbitration with CGP and we look forward for a timely update on the potential JV with Foxconn on a 12-inch wafer fab in Malaysia.

The research house is convinced that Wah Seong will register bumper profits in FY23-24f from the recognition of the RM1.1bil EACOP line pipe thermal insulation job and RM558mil EPC job for Yinson’s Agogo FPSO.

“Also, we highlight that the group will be bidding for 3 major tenders for its energy solutions division and four major tenders for its renewable energy division, which may result in job win announcements in 2H23,” HLIB said.

Commenting on PETRONAS’ results, HLIB said the oil giant recorded a decent 1Q23 core net profit of RM21.9bil.

“Petronas has laid out its dividend commitment of RM40bil for 2023, which we believe is highly doable although we expect the group’s profits and cash flows to normalise this year in tandem with lower average crude oil price and product prices from a high base effect in 2022.

“Petronas’ 1Q23 capex stood at RM10.5bil, which we deem to be a great start and with that, we are projecting a capex of RM50bil for the year 2023.

“We lower our Brent crude oil forecast to US$75-80/bbl for 2023 (EIA: USD80/bbl). Additionally, Petronas expects oil and gas prices to moderate further due to prolonged economic uncertainties,” HLIB said.

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PETRONAS , O&G , Capex , Wah Seong , DNeX


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