Velesto and Bumi Armada active, rise on national oil firm’s guidance of higher capex

TheEdge Thu, Nov 07, 2019 10:50am - 4 years View Original


KUALA LUMPUR (Nov 7): Shares in Velesto Energy Bhd (Velesto) and Bumi Armada Bhd rose 2.6% and 1.11% in active trade to 39.5 sen and 45.5 sen respectively at mid-morning today.

Both stocks were among the top active across Bursa Malaysia today.

UOB Malaysia analyst Kong Ho Meng pointed out that the leading indicator — the jack-up rig count — has seen an increase from earlier in the year, pointing to improvement in upstream activity.

On the other hand, the share prices of these companies were driven by positive leading indicators, as well as national oil firm Petronas’s guidance of higher capital expenditure (capex) in the latter half of the year.

Kong said the jack-up rig count across Malaysia and the Joint Development Area have increased from nine in February to 16 in September this year.

“However, whether the climb in O&G stocks can be sustained depends on the upcoming Petronas activity outlook for 2020-2022, likely to be released in December", he said.

“Otherwise, stock earnings might decline and investors should take profit,” he said.

In a recent note dated Nov 4, Affin Hwang Capital analyst Tan Jianyuan had advocated for investors to take profits amid the sector run-up, as the fourth and first quarters of the year are seasonally weak periods amid the monsoon.

He said that corporate earnings will be the focus this month and that maintenance and rig players could post stronger third-quarter results, benefiting from higher job flows.

Tan said the research house prefers companies with more exposure to brownfield work with good earnings visibility, including Dialog Group Bhd, Serba Dinamik Holdings Bhd, Velesto, Bumi Armada and Kelington Group Bhd.

“However, in view of the recent sector run-up and some stocks under our coverage nearing its fair values, we recommend to take profit on upcoming strong third quarter results announcements as the fourth and first quarters are seasonally weak due to monsoon,” he said.

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

AFFIN 2.460
ARMADA 0.570
BURSA 7.460
DIALOG 2.250
KGB 2.690
SERBADK 0.020
VELESTO 0.290

Comments

Login to comment.