Oil and gas sector More lubricants for growth
Story: The outlook for oil and gas sector remains positive, underpinned by high earnings visibility and strong contract flows. The sector’s earnings visibility is supported by the high order books for SGX-listed equipment/vessel builders and charterers. The strong contracts flow is underpinned by the global need to replace older/obsolete equipment/vessels, and to develop new oil fields.
Point: We have identified four investment themes for the oil and gas sector in 2008:
1) emergence of pair trading opportunities among blue chip oil and gas plays;
2) better Growth-At-Reasonable-Price (GARP) investment opportunities in mid-tier oil and gas plays;
3) higher activities related to offshore oil field development; and
4) mergers and acquisitions.
Relevance: We are overweight on the oil and gas sector, which presents good investment opportunities at current price levels. We believe that the mid-tier oil and gas stocks will outperform its peers in 2008, and feature strongly amongst our top picks. We like Cosco, Keppel Corp, Ezra Holdings, KS Energy, Jaya Holdings, and Swiber Holdings.
Wednesday, January 2, 2008
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