PETALING JAYA: AmInvestment Research is retaining its underweight call on the oil & gas sector, as it expects the massive global demand destruction from the uncertain extent and duration of the Covid-19 pandemic to continue depressing industry sentiments extensively in the foreseeable horizon.
In a note, the research house said the first quarter earnings reports for the nine companies under its coverage were slightly better, with the sector’s core 4Q’19 net profit rising 9% year-on-year to RM1.6 billion largely due to sharply higher petroleum tanker rates.
Against the backdrop of a sharp demand drop in upstream oil services, it also remains cautious on companies with high gearing levels.
“Excluding impairments and one-off adjustments, Sapura Energy Bhd registered a negative EBITDA of RM651 million, breaching net debt/EBITDA debt covenants for its RM10 billion loans, which need to be refinanced by the end of this year.
“However, the rest of the players are relatively comfortable at this juncture as Serba Dinamik Holdings Bhd has recently raised a 10% equity placement while Bumi Armada Bhd has reclassified a RM1.3 billion short-term debt to long term. While there is a risk that Velesto Energy Bhd could reverse to a loss in 2H’20 due to lower rig utilisation, its gross cash position should be able to meet its debt obligations for this financial year,” it said.
AmResearch is maintaining its 2020 oil price forecast to US$35–40/barrel (RM149-171), and US$45–US$50/barrel for 2021.
As for its buy calls, it recommends Dialog Group Bhd and Serba Dinamik Holdings, while retaining sell calls on Bumi Armada, Sapura Energy, Petronas Chemicals Group Bhd and Velesto Energy.
source https://www.thesundaily.my/business/amresearch-maintains-underweight-call-on-og-sector-BE2512131
No comments:
Post a Comment