Thursday, November 27, 2014
Oil: Takeaways from UOBK's roadshow in the US. KEP, SMM, SCI, and Ezion garnered the most interest. Fund mgrs wanted to know Keppel and SMM would be affected by lower oil prices, beyond the lower drilling rig orders that we have already seen in 2014, on expectation of a rig overcapacity in 2015-16. Fund managers also questioned whether the two Singapore yards are undertaking what seems to be a very low-margin (or potentially profitless) capex on drillship building.South Korean yards continue to price their drillships at low prices given their ample capacity and to maintain their dominance in drillship building. Among the mid/small caps, there was strong interest in Ezion, albeit some fund managers remained perplexed over its various JVs (ie Charisma, JK Tech, AusGroup and Triyards). There were pockets of interest in Pacific Radiance and Nam Cheong. Overall, fund mgrs remained wary of catching falling knives, and await better clarity on oil prices despite cheap stock valuations. The next 6-9mths will be a period of stock differentiation. UOBK top Buys in Singapore are SCI, Ezion, PAcific Radiance, and Triyards.