SG Conglomerates: Deutsche note that O&M still seeing interest but with some concerns on SMM’s order momentum vs Keppel, competition, delays from Brazil, and the sector being already well-owned. House maintains Buy ratings on KEP and SMM, although has less enthusiasm for Chinese shipbuilders in light of weak dry bulk mkt, where Chinese yards are most exposed.
Also has interest in ST Engine for its 50-60% exposure in defense and govt-related contracts, strong cash flows, and healthy div. Ezra’s recent poor results was disappointing and will re-visit if earnings recover. Overall house remain O/w on O&M sector and prefer SG yards to Chinese shipbuilders for the robust O&G industry fundamentals and KEP and SMM’s strong positioning. TPs are as follows: KEP $13.60, SCI $7.00, SMM $7.00, STE $3.95, Ezra $1.65, YZJ $2.30, Cosco $2.45.
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