PETALING JAYA: AmInvestment Bank Bhd (AmInvest) has maintained its “overweight” call on the oil and gas sector (O&G) despite lower earnings in the first quarter of 2023 (Q1 2023).
The sector’s core net profit for Q1 2023 softened 13% quarter-on-quarter (q-o-q) to RM2.5 billion in conjunction with a similar percentage drop in revenue to RM16.3 billion.
The disappointing results owed largely to lower contributions from MISC Bhd and Hibiscus Petroleum Bhd, according to AmInvest.
“MISC’s (Q1 2023) earnings were due to weaker contributions across all key operating segments while Hibiscus Petroleum’s performance was impacted by lower realised oil prices,” said AmInvest analyst Lucas Tan Jun Sian.
In a research note today, Tan also raised concern over the sharp decline in contract awards to O&G companies in Q1 2023.
“Q1 2023 contract awards to Malaysian O&G companies dipped by 68% q-o-q to RM1.9 billion from RM6 billion in Q4 2022 mainly due to the non-repeat of several lumpy contracts awarded in the previous quarter,” he said.
The research house also lowered its full-year oil price projection from US$85 (RM380.55) per barrel to US$83 (RM371.59) per barrel on recessionary fears.
“Despite the recent oil price weakness amid looming recession fears in developed countries, we opine that the higher global oil demand particularly from China coupled with the production cut by Opec+ (Organisation of the Petroleum Exporting Countries and allies) would lead to a tighter supply market in the second half of 2023,” said Tan.
Despite the underwhelming quarterly results, AmInvest retained its “buy” call on Dialog Group Bhd with a fair value of RM3.31, highlighting the group’s resilient non-cyclical tank terminal and maintenance-based operations.
The research house also held a favourable view of Petronas Gas Bhd, placing a “buy” call with a fair value of RM19.39, due to the company’s decent 4.7% dividend yield, optimised capital structure and resilient earnings.