Still bullish on the longer term. On a longer term basis, our Overweight view remains unchanged because we believe:
1) oil price will go up ultimately;
2) the worst of the global economic turmoil may be over, with mild signs of recovery emerging, thus leading to higher demand for energy in the future, and
3) most O&G stocks are still trading at single digit PER valuation compared to when they reached as high as 15-18x during better times.
Also, we believe that there is not enough conventional oil to satisfy global demand by 2030 and that non-conventional production is a costly necessity. Hence, oil price has no way to go but up as no oil majors will produce at a loss on a long-term basis and demand and supply factors will ensure oil prices go higher.
Our picks are Alam (BUY, TP: RM1.95), Kencana (BUY, TP:RM2.14), Petra Perdana (BUY, TP: RM3.50) and Wah Seong (BUY, TP: RM2.58).
Our picks are Alam (BUY, TP: RM1.95), Kencana (BUY, TP:RM2.14), Petra Perdana (BUY, TP: RM3.50) and Wah Seong (BUY, TP: RM2.58).