PETALING JAYA: UOB Kay Hian (UOBKH) Research has maintained a “market weight” call on Malaysia’s oil and gas (O&G) industry, noting that although there are more “buy” calls in terms of valuation grounds, it remains “neutral” on the sector until it sees firm clarity on the resolution of the Petroliam Nasional Bhd (PETRONAS)-Petroleum Sarawak Bhd (Petros) political impasse.
The research house told clients it had identified the issue – which centres on a jurisdictional disagreement – as the key sector de-rating catalyst since the second half of financial year 2024, an assumption it has maintained ever since.
“We acknowledge that several gems are proving to be nimble against changes in the business environment,” the research house added.
UOBKH Research said recent geopolitical events were greatly undermining seafarers’ human rights, blurring the distinction between a shipping route and a war zone.
At the same time, markets remained bullish on global tanker stocks as a geopolitical hedge.
The research house said it was studying the elusive global shipping environmental, social, and governance risk regarding human rights, which could potentially have a significant price impact on global shipping stocks that are currently perceived as a defensive geopolitical hedge.
As the global seafarer shortage coincides with a worsening retention crisis driven by various human rights issues, UOBKH Research believes this could become a materiality topic extending beyond shipping and across multiple sectors.
Given that seafarers enable almost 90% of global trade, the shortage could indirectly increase the cost of doing business for sectors that depend on global trade, UOBKH Research said. Sectors that may face materiality impact include shore-based ecosystems such as ports and yards, as well as financials (especially marine insurers).
Citing Lloyd’s List, UOBKH Research said global tanker stocks have proved again to be a worthy hedge for investors, even as geopolitical unrest has been a headwind for the broader market.
It said stocks in the crude tanker and product tanker segments have gained 15% and 13%, respectively in the past month, adding that some stocks like International Seaways Inc and Okeanis Eco Tankers Corp outperformed in gains relative to the start of the Strait of Hormuz crisis (plus 47% to 50%) and across a one-year timeframe (plus 123% to 130%).
In Malaysia, its top pick is MISC Bhd
with a target price of RM9.50 per share.
As a stable dividend play, MISC’s valuation underperformed global crude tanker peers despite the sector’s continued bullishness, UOBKH Research said.
It noted that the valuation discount is mainly due to expiring obsolete steam- turbine liquefied natural gas carriers, which were substantial in its fleet.
At last look, MISC was at RM8.31 apiece.
