Oil and gas sector
Reiterate positive: Petroliam Nasional Bhd (Petronas) released its third edition of its Petronas Activity Outlook (PAO) 2020-2022 last Friday. While there are some components in the report that are new and refreshing, there are also shortcomings in this report. Overall, we see Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), Velesto Energy Bhd, MISC-Yinson and offshore support vessel (OSV) players (Alam Maritim Resources Bhd and Icon Offshore Bhd) as potential beneficiaries of the PAO 2020-2022.

 
There are several new features in this PAO, which we find refreshing, such as the: i) new investment prospects; ii) decommissioning of facilities and wells; and iii) the plant turnaround outlook.

We see MMHE as a key beneficiary of Petronas’ projected rise in fabrication workflows in Malaysia for 2020, a positive for its order replenishment prospects. Besides Petronas’ upside, winning a job(s) from Saudi Aramco’s yearly tenders (US$3 billion [RM12.42 billion] per annum) is also a key catalyst. Elsewhere, Velesto Energy Bhd remains the best proxy to Petronas’ drilling programmes. Alam Maritim and Icon Offshore are key features for an exposure to the laggard OSV space. Meanwhile, the MISC-Yinson joint venture and T7 Global Bhd, in our view, are the front runners for the Limbayong floating production storage and offloading (FPSO) vessel charter jobs and Bayan mobile offshore production unit jobs, respectively.

While most of the oil and gas (O&G) companies under coverage are major recipients of Petronas’ activities, there are some notable names that have established themselves as global players in their respective space, such as: i) Yinson Holdings Bhd in the FPSO segment; ii) Wah Seong Corp Bhd in the pipe coating works; and iii) Sapura Energy Bhd in the engineering and construction operations. — Maybank IB Research, Dec 16