SG O&M: CS has sector report. Note that valuations more attractive, but downside risks remain. While valuations have come down from recent peaks, believe that they are not sufficiently attractive to be positive on the entire sector given macron uncertainty and a tightening of credit. believe earnings are increasingly at risk with a potential slowdown in orders.
Believe most stocks are pricing in a mild-2001 type US recession on a P/B basis. House has downgraded Sembcorp Marine and STX OSV to NEUTRAL and believe they have the largest risks to orders and earnings expectations. Remain comfortable on stocks close to meeting order expectations or are close to trough valuations, including O/p-rated Keppel (top pick), Sembcorp Industries and Yangzijiang. Cosco Corp (U/p) remains as least preferred.
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