FPSO Outlook Weighed Against Energy Transition While the FPSO industry benefits from an all-time high backlog, we think players should sharpen their focus on decarbonisation/clean energy pathways, as we foresee diverging patterns in this “new field growth” depending on various factors. For example, it seems solar and wind will not be part of Bumi Armada and Yinson Production (the FPSO arm), even though wind is officially under SBM Offshore. MISC remains as a green transportation arm though it ma...
A director at Velesto Energy Berhad bought 1,000,000 shares at 0.195MYR and the significance rating of the trade was 50/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two yea...
GREATER CHINA Economics Inflation Deflationary pressures rising. Sector Construction Building on the positive development of macroeconomic policies in 2H24-2025. Internet 2Q24 results wrap-up: Overall earnings beat; 2H24 outlook remains promising. INDONESIA Small...
Embracing Uncertainties In Local Wells Requirement VEB will have a weaker 2H24 in terms of utilisation, due to the three SPS for its rigs. VEB’s ability to replenish contracts, especially for N3, is commendable. However, we were correct that the risk of a potential Sarawak project rationalisation would have a material impact for N5. We upgrade our forecasts by 11-49% and retain our 5x EV/EBITDA assumption, but upgrade VEB to HOLD. Target price: RM0.25.
1H24: Utilisation And Profits Peaked In 2Q24; Retain HOLD 1H24 core performance inline with expectations : 2Q24 may be VEB’s strongest revenue days since 2014. Both core profits and core EBITDA generated in 1H24 at RM110m and RM289m respectively, and formed 67-68% of ours and consensus 2024F forecasts respectively. We still deem the performance in line, expecting 2H24 to be weaker vs the peak performance achieved in 2Q24. For 1H24, all rigs were fully utilized save for rig Naga 2 which had downt...
Cautiousness in Business Enquiries: Signs Of Local O&G Capex Slowdown? Geopolitical risk may be the norm in the new world order, but we think this has been happening in Malaysia for the past six years. The highlight of this saga is when Petros took over the role of sole gas aggregator of Sarawak’s gas business, followed by major changes in Petronas’ top leadership roles. Although nothing is confirmed, channel checks suggest activities are slowing down. We advocate defensive stocks that are diver...
Malaysia’s Positioning As Regional CCS Storage Hub As we predicted, 2024 may be the year to evaluate Malaysia/Petronas’ CCS milestone. This is because Asia’s CCS projects are maturing, as major industries (ie emitters) take concrete action on emission targets. Malaysia is a clear beneficiary as a CCS storage hub, not only due to its local O&G fields and industries, but also strategically overseas emitters especially Japan and Korea. MISC, our sector top pick, is also a clear CCS beneficiary (LCO...
GREATER CHINA Economics Money Supply Money supply growth slows further. Trade Wider trade surplus in June on robust exports growth. Sector Banking Implications of PBOC’s bond sales for China banks. Update JD.com (9618 HK/BUY/HK$112.00/Target: HK$150.00) 2Q24 results ...
MISC-Bumi Armada Is Better Off Collaborating In Certain Projects Speculations of a merger might have lifted Bumi Armada’s (BAB) share price in the past month. While combining both FPSO fleets may propel the merged entity to Modec’s fleet size, alongside complementary geographical FPSO market presence, the stumbling blocks are too great in our opinion. There is a lack of financial synergies from the non-FPSO segments. If any, we think a collaboration in certain projects may generate more positive...
Middle East-Driven Cycle Reverses Its Course Saudi Aramco’s suspension of close to 22 JU rigs (6% of global fleet) had resulted in a cap in Asia JU rig rates, thereby completing the “mini-cycle” that started in 2022 when DCR spiked due to the Middle East rig acquisition spree. Locally, there may be a rationalisation of Sarawak projects. We see negligible risk to VEB’s 2024 earnings, and for 2025/26, the risks are manageable. However, sentiment has been priced in. We retain our forecasts. Maintai...
GREATER CHINA Initiate Coverage BYD Electronic (285 HK/BUY/HK$37.35/Target: HK$47.70) Robust multi-year growth cycle driven by content gains and GenAI themes. Update Pinduoduo (PDD US/BUY/US$133.88/Target: US$200.00) Fostering overseas expansion to mitigate regulatory uncertainties. INDONESIA Update Jasa Marga (JSMR IJ/BUY/Rp5,250/Target: Rp7,300) Progress in JTT equity financing. MALAYSIA Sector Technology ...
Petronas Set To Embrace Volatilities In Net Zero Transition Petronas’ 1Q24 results showed that no business can escape the effects of volatility, as it experienced lower averaged realised prices, but higher costs. The local capex allocation for O&G and upstream achievements is overshadowed by the many uncertainties of existing projects (PRefChem) and the commercial settlement agreements with East Malaysia. Petronas remains steadfast in its target RM142b upstream capex for five years, with its foc...
GREATER CHINA Sector Property - Hong Kong Limited Downside Risks To Property Price in Near Term; Watch For Policy Support For Hong Kong Tourism. INDONESIA Update XL Axiata (EXCL IJ/BUY/Rp2,320/Target: Rp2,900) 2024 net profit could grow 45% yoy, partly driven by network improvement. MALAYSIA Sector Oil & Gas Petrona...
1Q24: Delivering Results; Potentially More Business Diversification To Justify Rerating 1Q24 core profit inline and met 23% of our 2023F expectations, while EBITDA (the financial metrics VEB’s valuation is based on) met 31% of our full year forecast. The strong 1Q24 showing was due to higher average daily charter rates at US$107,000 (4Q23: US$99,000; 1Q23: US$87,000), and rig utilisation which climbed to 94%. While drilling revenue grew, opex continued to rise alongside depreciation.
Volatility During Transition Period Of Retargeting Fuel Subsidies While the implementation is with good intentions, the retargeting of diesel subsidy (under the SKDS 2.0 system) could lead to short-term stock volatilities for PetDag and Petron Malaysia, as well as the commercial/logistics companies involved. Ideally, the utilisation of the new fleet card system should have started on 1 Apr 24 in order to be on track for a full Jun 24 implementation, although there are some teething issues, espec...
Petronas 2023: Commendable Financials Amid Rising Costs Unlike previous years (of capex deferrals), Petronas’ 2023 capex is a testament that it is not only playing catch-up on its core business, but is also remaining true to its energy transition pathways. However, Petronas explicitly highlighted that domestic costs surged (despite lower revenue), and there is a low likelihood of oil prices and vessel rates continuing with the upward trend, while execution risks remain prevalent. We take the opp...
OTC Asia 2024: Driving Excellence And Collaboration Petronas’ trademark Offshore Technology Conference (OTC) Asia 2024 is viewed as a successful platform that drives innovation (and showcasing of technology) and engagements. The industry is embracing the unknowns of energy transition and security, hence driving collaborations. Although none of them are easily near-term developments include Deleum, Uzma, MMHE, MISC, Sapura Energy and T7Global (NR). We retain sector OVERWEIGHT for now.
Rates And Utilisation Fully Priced In For 2024 As expected, VEB is likely to have secured another extension of the Petronas umbrella contract; hence, 2024 contracted utilisation should be similar to that of 2023. Having said that, the locked-in rates also imply that VEB is unlikely to benefit from a continued upward trajectory of global rig rates. 2024 may come with a new set of challenges ie rising costs and supply chain delays causing slippage risk on new rig fixtures. As riskreward is priced ...
GREATER CHINA Economics 2024 Government Work Report: China aims for 5% growth. Sector Property: Divergence of policies and property sales between Tier 1 cities and Hong Kong. INDONESIA Results Pertamina Geothermal Energy (PGEO IJ/HOLD/Rp1,195/Target: Rp1,260): 2023: Solid performance; EBITDA growth expected to be flat in 2024. Downgrade to HOLD. MALAYSIA Sector Construction: Mixed 4Q23 results but 2024 outlook remains resilient anchored by imminent rollout of mega projects. Maintain OVERWEIG...
2023: Operating Metrics In Line With Expectations; Pricing In Rate Hike For 2024 Horizon 2023 operating metrics met expectations. The core profit met 100% of our 2023F expectations but EBITDA exceeded our forecast of RM270m. The strong 4Q23 showing was due to higher average daily charter rates (DCR) at US$99,000 (3Q23: US$97,000) and rig utilisation which climbed up to 94% (the last time it was below 60% was in 1H22). On a full-year basis, the average DCR was US$94,000
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