AMBANK Research maintains overweight call on the oil and gas sector with five buys, two sells and one hold.
The five companies that it places buy calls on, are Petronas Gas, Dialog Group, Serba Dinamik Holdings, Petronas Chemicals Group and Bumi Armada.
“We recommend Petronas Gas as the group’s optimal capital structure strategy and resilient earnings base translates to highly compelling dividend yields.
“We also like Dialog Group and Serba Dinamik Holdings due to their resilient non-cyclical tank terminal and maintenance-based operations while Petronas Chemicals Group has a high correlation to the recent oil price upturn,” said analyst Alex Goh.
Bumi Armada was chosen as it has shown stabilising profitability from improved operating performance of its FPSO Armada Kraken while its balance sheet has strengthened.
On the developments in the energy sector, AmBank Research said, the Rystad Energy’s 2020 APAC Virtual Annual Summit has highlighted that large international oil companies were now switching to renewable energy from fossil fuels amidst a suppressed global demand outlook due to Covid-19 pandemic.
“The growth in solar photovoltaic generation is expected to accelerate, growing to 10GW by 2030 from 2GW currently due to declining solar panel costs, despite lower electricity prices for wind power.
“Additionally, renewable energy may have export potential if hydrogen electrolyser projects are widely adopted by Europe, notwithstanding the current debate on the environmental impact and cost of hydrogen fuel cells,” added Goh.
AmBank Research also opined that Big Oil’s transition to renewable energy could trigger a merger and acquisition wave.
It said shareholder and green agenda activism were increasingly causing Big Oil’s transition from fossil fuels with plans to expand renewable energy by 6.4x to 45GW with planned capex of US$200bil (RM825.5 bil) by 2030 from 7GW currently.
All majors, except for Exxon Mobil for now, have committed to achieve net zero emissions by 2050 with plans to divest their overseas oil & gas investments. – Sept 18, 2020
