PETALING JAYA: Despite growing headwinds, BIMB Research believes the local oil and gas (O&G) sector stocks offer selective opportunities with stronger projects flow expected over the next six to 12 months, as companies focus on high-grade projects underpinned by stabilising oil prices and easing drilling service rates.
This will benefit upstream services providers such as Malaysia Marine and Heavy Engineering Holdings Bhd
(MMHE), Velesto Energy Bhd, Vantris Energy Bhd and MISC Bhd.
The research house, which has maintained an “overweight” call on the O&G sector, favours in particular companies with long-term earnings visibility, solid growth potential and decent dividend yields.
Its top picks are MISC (buy, target price (TP) of RM9.90 a share) and Hibiscus Petroleum Bhd (buy, TP: RM2.10).
“We are optimistic on MISC’s growth outlook, underpinned by robust demand for floating production, storage and offloading (FPSO) vessels, particularly in frontier markets such as Brazil, Guyana, Suriname and Angola,” the research house stated in its latest sector report.
It added Hibiscus’ plans to lift production to 35,000 to 50,000 barrels of oil equivalent (boe) per day from 28,000 boe per day now will drive its earnings and offset softness in crude oil price.
BIMB Research has a “hold” call on Dialog Group Bhd (TP: RM2) as the company’s Pengerang Deepwater Terminals project could help turn it into a regional hub for oil, gas and petrochemicals.
BIMB Research warned order book replenishment is crucial for fabricators and drillers like Vantris, MMHE and Velesto whose current order book offers earning visibility of less than three years.
For its part, MMHE is seeking to replenish as its tender book has risen sharply to RM11bil from RM5bil, according to the research house.
It added MMHE’s joint venture with MISC is focused on capturing mid-sized FPSO conversion opportunities in the region, with multiple projects in the pipeline including Kelidang FPSO (Brunei), Kikeh FPSO replacement (Malaysia), Sepat FPSO (Malaysia) and Tengkulo FPSO (Indonesia).
BIMB Research has a trading “buy” call on MMHE (TP: 94 sen), Velesto (TP: 27 sen), and Vantris (TP: 72 sen).
Offshore maintenance services providers have had a tough first half of financial year 2025 (1H25) with names like Dayang Enterprise Holdings Bhd (hold, TP: RM1.55) and Petra Energy Bhd badly affected by capital expenditure cuts by upstream oil companies and slower work order flows.
BIMB Research, however, noted Dayang is expected to post stronger results in 2H25, but its year-on-year comparison will be weighed by a high 2024 earnings base.
