1. business and industrial
2. energy
3. oil

Sector Update, 2 April 2015
Integrated Oil & Gas
Overweight (Maintained)
Macro
Risks
Pockets Of Opportunity
Growth
Value






2

2

3
2
We believe that the price of crude oil and share prices of the regional
O&G stocks under our coverage have bottomed out, with most of the
bad news already priced in. We expect a rebound in both over the next
12 months. For the O&G services sector, our analyses indicate that the
companies in this sector will be able to weather the storm. There are
pockets of opportunity to be found in this bearish environment.


Unless otherwise mentioned, all share price data as at close on
31 March 2015
Regional O&G Team
Thailand: Kannika Siamwalla, CFA
[email protected]
We believe that the current crude oil price level is not sustainable and
that most of the negative expectations have already been factored into
stock prices of the oil & gas (O&G) companies under our coverage. Our
2015 and 2016 crude oil price forecasts are USD72.50/barrel (bbl) and
USD80.0/bbl respectively. A rebound in the crude oil price will be
positive for exploration & production (E&P), refineries and
petrochemicals due to their direct exposure to oil prices. We believe that
the O&G services sector will also see a re-rating once crude oil prices
rebound. Although this sector is currently facing contract renegotiations,
we believe the negative news have been priced in. This current bearish
sentiment on the services sector does not contradict our bullish view on
crude oil price. It is expected. The global cuts in exploration
projects/layoffs/budget cuts/lower rig counts etc. all have to happen in
order for our bullish crude oil price scenario to play out.
Dialog‟s (DLG MK, BUY, TP: MYR1.65) storage terminal is the prime
beneficiary in this oil contango market, while its long term value remains
attractive where it could be the next Amsterdam-Rotterdam-Antwerp
(ARA) of Asia. We are long shallow-water offshore support vessel (OSV)
builders and operators and are short deepwater players. In this space,
we like Nam Cheong (NCL SP, BUY, TP SGD0.53), Pacific Radiance
(PACRA SP, BUY, TP SGD1.24), Perdana Petroleum (PETR MK, BUY,
TP: MYR1.53), and Logindo Samudramakmur (LEAD IJ, BUY, TP:
IDR6,200). Drilling rigs seem to be in oversupply in South-East Asian
waters, with an expected 74 rigs vying for contracts in mid-2015. Rig
utilisation is expected to bottom out in July and recover by February
2016. We like Coastal Contracts (COCO MK, BUY, TP: MYR4.30). For
floating, production, storage and offloading (FPSO), we expect six FPSO
contract awards in 2015, down from 10 in 2014. We also have a BUY on
Yinson (YNS, BUY, TP: MYR4.50).
Stock Highlights
Com pany Nam e
Price
Target
P/E (x)
P/B (x)
Yield (%)
Dec-15F
Dec-15F
Dec-15F
Rating
Coastal Contract
MYR2.94
MYR4.30
8.1
1.2
3.1
BUY
Dialog
MYR1.56
MYR1.65
30.4
4.6
1.3
BUY
Ezion Holdings
SGD1.08
SGD2.18
4.8
0.9
0.1
BUY
Malaysia: O&G Team
Nam Cheong
SGD0.31
SGD0.53
4.8
1.2
5.7
BUY
[email protected]
Pacific Radiance
SGD0.68
SGD1.24
4.6
0.7
5.2
BUY
Perdana Petroleum
MYR1.28
MYR1.53
10.9
1.3
Malaysia: Kong Ho Meng
[email protected]
Singapore: Lee Yue Jer, CFA
[email protected]
-
BUY
Source: Company data, RHB
Singapore: Jesalyn Wong
[email protected]
See important disclosures at the end of this report
Powered by EFATM Platform
1
Integrated Oil & Gas
2 April 2015
Table of Contents
Pockets Of Opportunity
3
Sector Outlook: The Details
Storage: benefiting from the contango situation
5
OSV building sector: not all are bad
8
OSV operators: slowdown in activities
10
Drilling rig operators: challenging times ahead
12
FPSO: down but not out
13
Financial assessment by country
Singapore: only few are highly leveraged
16
Malaysia: most companies are modestly leveraged
19
RHB O&G Coverage
See important disclosures at the end of this report
16
22
2
Integrated Oil & Gas
2 April 2015
Pockets Of Opportunity
Regional O&G perspective
 Crude oil price and share prices of stocks
under coverage have bottomed out
 Crude oil price is not sustainable at these
levels. We believe sooner or later an
equilibrium in the oil market will be reached
 Upwards trajectory expectation on crude oil
price bodes well for the O&G sector
 We believe there are pockets of opportunity
to be grasped under this current bearish
environment.
We are OVERWEIGHT on the regional O&G sector. We believe that the crude oil
price and share prices of the O&G stocks under our coverage have bottomed out,
with most of the bad news already priced in. We expect a rebound in both over the
next 12 months, as we believe the current crude oil price levels are not sustainable.
For the O&G services sector, our financial analysis indicates that these companies
will weather the storm and there are pockets of opportunity to be found under this
bearish environment.
We believe the current crude oil price levels are not sustainable. We are currently in
an oil oversupply situation, with an estimated 1.13m bbls per day (mbpd) for 2015.
The oversupply is estimated at 1.83mbpd in 1H15 and is expected to fall to 0.4mbpd
in 2H15. As such, we forecast crude oil price to average USD65/bbl in 1H15 and
USD80/bbl in 2H15, bringing the average crude oil price to USD72.50/bbl for FY15.
Our crude oil price is forecast at USD80/bbl for 2016 onwards.
This upwards trajectory expectation in crude oil price will be positive for the E&P,
refinery and petrochemical firms. We believe the O&G services sector will also see a
re-rating once crude oil prices rebound. However, the earnings recovery for the O&G
services sector will not be as immediate as the companies operating in this sector are
more on a contract basis. Although the O&G services sector is currently facing the
risk of contract renegotiations, we believe that all these negative news have already
been factored into the share price. This current bearish sentiment on the services
sector does not contradict our bullish view on crude oil price. It is expected. The
global cuts in exploration projects, layoffs, budget cuts, lower rig counts, etc, all have
to happen in order for our bullish crude oil price scenario to play out.
In this report, we discuss the outlook of the major O&G services sub-sectors, ie the
storage tanks, the OSV builders/operators and the drilling rig and FPSO players. We
also performed financial analysis on the key stocks under coverage. We believe there
are pockets of opportunity to be found under this bearish environment.
Storage: benefiting from this contango situation
 The contango situation has benefited global
storage players – short-term bullish but
longer term storage supply is on the rise
 Dialog is the best beneficiary in this oil
contango situation
Commodity traders and producers are on high activity mode to stock up on cheap
crude oil and petroleum products. This is due to expectations that oil prices will
recover towards late 2015, in line with our current house view. This “contango”
situation has benefited global storage players who own tank farms. The short term
outlook is bullish, given active industry developments and a supportive market
environment. However, investments in storage terminals have to ultimately take a
long-term perspective. Although the Asia-Pacific region is experiencing the largest
growth in demand and refinery expansions in China, India and the Middle East, there
are concerns on whether the Straits Hub (a combination of storage capacities in
Singapore and Indonesia and the Pengerang Terminal in Malaysia) will be overtanked after a 5-year horizon from now. As such, storage rates and contact tenures
may correct to slightly lower levels on a longer-term horizon.
Dialog‟s storage terminal is the best beneficiary in this oil contango market, in line
with our expectations of long-term Brent crude oil of USD80/bbl, while its long-term
value remains attractive, ie where it could be the next ARA of Asia.
OSV building sector: not all are bad
 The smaller AHTS vessels have older age
profile, caters to shallow waters and looks to
be under built
See important disclosures at the end of this report
Smaller anchor handling tug supply (AHTS) vessels of <10,000 brake-horsepower
(bhp) are of older age profile and cater to shallow water operations. With a global
orderbook of only 12.2% of global fleet, we believe that this segment is under-built
and will continue to see sustained new orders. Larger AHTS vessels (>20,000bhp)
cater to the deep and ultra-deep waters, and these vessels are taking the brunt of the
current bear market in oil, especially with their relatively young fleet age profile. This
is because, with a global orderbook at 22.8% of the global fleet, we believe that this
segment may not enjoy replacement demand in the near term. In terms of prices,
small AHTS prices at the yards have held firm for the last four years, having never
recovered much from the 2008 crash. Large AHTS, however, saw prices rebound to
nearly pre-crisis highs, but these prices have come off c.25% since mid-2014.
3
Integrated Oil & Gas
2 April 2015
 Both large and small PSV prices are falling
across the board, seems overbuilt at this
stage
 Long shallow-water OSV builders and
owners, short deepwater and ultra-deep
water players
Platform supply vessels (PSVs) are looking somewhat overbuilt, with 390 in the
global order book (mostly of the larger models), or 26.6% of the global PSV fleet by
vessel count of 1,465. Of these, 230 are being built in China, where there are risks of
slippage and yard insolvencies. Prices for the PSVs are falling across all segments
with what we consider a relatively large orderbook-to-fleet ratio.
Shallow-water OSV builders and owners should do well. We expect players like Nam
Cheong and Marco Polo Marine (MPM SP, BUY, TP: SGD0.60) are likely to continue
delivering healthy earnings from OSV-builder or chartering operations, as asset
prices and charter rates remain healthy. We believe that the deepwater and ultradeepwater players will continue to remain in the doldrums in this bear oil market. The
major players in this space are Vard (VARD SP, NEUTRAL, TP: SGD0.50), Pacc
Offshore (POSH SP, NR), EMAS Offshore (EMAS SP, NR) and Swiber (SWIB SP,
NR).
OSV operators: slowdown in activities
 Petronas cuts expenditures and renegotiates
contracts, giving preference to short-term
contracts but providing a premium in charter
rates over the longer-term contracts
 Large projects are still in the pipeline, but
there maybe delays
 Companies with modern fleet, long term
contracts are preferred
For Malaysia, the OSV industry will be undergoing a consolidation phase as Petronas
starts to trim its capex and opex. Our conversations with service as well as vessel
providers in Malaysia have also confirmed that they have been asked to renegotiate
their contract fees and rates by oil majors around the region with the quantum of
reduction still being ironed out. We believe the longer-term contracts are secure.
However, the rates may be lower than the original contracts. Spot charter rates are
likely be at a premium to the long-term charter contracts, but the downside to this
premium is the lack of security in earnings visibility.
For Indonesia, there are several major projects that are in the pipeline, ie BP‟s (BP
LN, NR) USD12bn liquefied natural gas (LNG) project, ENI‟s (ENI IM, NR) USD4bn
project and Chevron‟s (CVX US, NR) USD7bn deepwater project. We believe these
projects will move forward, albeit with delays due to the current unfavourable crude
oil market environment and also changing political situations. Currently, Indonesian
players are also seeing a downward revision of charter rates of 5% as oil operators
embark on cost rationalisation schemes. We believe that near-term horizon will be a
challenge for the Indonesian OSV players. However, we are positive on the
Indonesian O&G sector as we believe investments will start to pick up helped along
by the current government‟s initiative in reviving the sector.
For the OSV operators under our coverage, we are still positive on Perdana
Petroleum, Logindo Samudramakmur and Pacific Radiance, as we believe their
modern fleets will continue to be in demand – backed by their long-term charter
contracts. Having said that, we are not discounting the possibility of earnings
fluctuations, as we believe charter rates will be under threat in the current low oil
price environment.
Drilling rigs operators: challenging times ahead
 Drilling rigs seems to be in an oversupply in
South-East Asian waters, with an expected
74 rigs vying for contracts by mid-2015
 Rig utilisation is expected to bottom out in
July and recover by Feb 2016
Drilling rigs are in an oversupply situation in South-East Asian waters. By mid-2015,
we expect 74 drilling rigs will be vying for contracts in these waters. We believe that
rig operations will be facing difficult times securing new contracts in the current
oversupply situation. Rigs will either have to take lower charter rates or the players
have to be prepared to cold/warm stack their rigs and incur operational costs until
such a time when oil prices become economical again. Assuming crude oil price
reached its bottom in January, we expect rig utilisation rates to fall to their lowest
sometime in July and then recover in seven months‟ time, ie by Feb 2016.
Under our coverage, we have Perisai Petroleum Teknologi (Perisai) (PPT MK, SELL,
TP: MYR0.51) and Coastal Contracts involved in the chartering of jack-up rigs. We
are concerned about Perisai‟s idle assets, although management stated that it is
bidding for long-term contracts for the company‟s second jack-up rig due for delivery
in mid-2015. However, Perisai remains cautiously optimistic due to the current
oversupply of jack up rigs in the market. We have a BUY recommendation on Coastal
Contracts for its strong shipbuilding orderbook and since it is taking efforts to dispose
its jack-up rigs.
 Six FPSO contract awards are expected in
2015, down from 10 contracts in 2014
See important disclosures at the end of this report
FPSO: down but not out
FPSO orders are not likely to dry up in 2015, but the industry is turning more
conservative in its expectations. For 2015, six FPSOs awards are expected, down
from 10 awarded in 2014. Although the industry has started to rationalise its new
contract award expectations, we believe that contracts already awarded will not see
terminations or reduction in charter rates, without compensation.
4
Integrated Oil & Gas
2 April 2015
 Prefer Yinson to Bumi Armada
Major players in this space are Yinson and Bumi Armada (BAB MK, NEUTRAL, TP:
MYR1.22). Both Yinson and Bumi Armada are trading at 10x EV/EBITDA, which is
comparable to the global average, unchanged from six months ago. Although both
are trading at similar valuations, we prefer Yinson over Bumi Armada for its proven
execution.
Sector Outlook: The Details
 The contango situation has benefited global
storage players
 Floating and onshore storage have their
different advantages
 Short-term bullish, but longer-term storage
capacity is on the rise
See important disclosures at the end of this report
Storage: benefiting from the contango situation
Storage players riding on the contango market. Commodity traders and
producers are on high activity mode to stock up on cheap crude oil and petroleum
products, on expectations that oil prices will recover towards late 2015, in line with
our current house view. The futures market, for example, is pricing crude three years
out at USD20 more than the current spot price, according to the International
Maritime Associates‟ statement on floating storage. This contango situation has
benefited global storage players, whether floating or land storage. Although there is
no public data on storage rates and occupancy rates, the industry had been receiving
increased inquiries for tank storage. The last time the oil market was in a significant
contango, ie in 2008/2009, traders stored 100m barrels at sea, according to a tanker
owner‟s comments.
Floating vs onshore. Demand for floating storage surged following the oil price
plunge, as tanker prices surged and rates for a 12-month ship charter almost
doubled. The move to build onshore storage is due to the fact that capacity can be
significantly greater and there is more flexibility in terms of products storage in
different tanks. However, onshore storage is dependent on location, ie it has to have
sufficiently deep draught for larger tankers to berth and offload, whereas there are no
such issues with floating storage. China‟s storage operators have increased their
commercial tank capacity by more than a tenth YTD, with one example being
Koninklijke Vopak (Vopak), which is building an 8.8m bbl base in Yangpu (Southern
Hainan), already receiving enquiries for storage space leasing that is slated to be
ready by April. In Malaysia, the Pengerang Terminal is the first commercial crude oil
tank farm in South-East Asia. Phase 1 of this terminal started operations in Apr 2014,
with an initial total capacity of 0.4m cu m to be ramped up to 1.3m cu m by this year.
The partners for this terminal are Vopak (44%, the operator), Dialog (46%) and the
Johor State Government (10%). For Phase 2, the total capacity will be 2.1m cu m,
with commercial operations expected in late 2018/2019. The partners for Phase 2 will
be Vopak (25%), Dialog (25%), the Johor State Government (10%) and Petronas
(40%). Vopak is the world's largest storage player. Major producers like BP and
Total (FP FP, NR) have already leased the storage space.
Storage is a long-term game. The short-term outlook is bullish, given active industry
developments and a supportive market environment, but investments in storage
terminals have to ultimately take a long-term perspective. Whilst the Asia-Pacific
region is experiencing the largest growth in demand and refinery expansion in China,
India and the Middle East (which will require more storage for product push into the
market), industry participants at a Platts conference in 2014 expressed concerns on
whether the Straits Hub will be over-tanked after a 5-year horizon from now. Although
there is no published data on global total storage capacity and utilisation, there is a
significant amount of storage capacity already rising in Fujairah (part of the United
Arab Emirates), South Korea and India. We believe the Straits Hub will remain as an
attractive proposition given its strategic location.
5
Integrated Oil & Gas
2 April 2015
Figure 1: Refinery capacity additions 2012-2016
Source: Platts ABLS Conference Jul 2014, World Oil Outlook, OPEC
Figure 2: Storage capacity additions in South Korea
Source: Platts ABLS Conference Jul 2014
Figure 3: Timeline and storage capacity for the Straits Hub’s liquid oil storage
Source: Platts ABLS Conference Jul 2014
See important disclosures at the end of this report
6
Integrated Oil & Gas
2 April 2015
 Dialog the single largest listed beneficiary to
this bullish sentiment
Dialog – scarcity premium to onshore storage. The Malaysian Government plans
to build close to 10m cu m of storage capacity by 2020 in Southern Johor, from a
total of ~3m cu m currently. This compares to VTTI Energy Partners‟ (VTTI) current
combined global storage capacity of 8.5m cu m and about a third of Vopak‟s global
capacity of 31m cu m.
Dialog remains the single largest listed beneficiary to this segment and will also ride
on the wave to become part of the next ARA of Asia. The company recently received
the final green light to develop the third and final key phase of its Pengerang
ventures. Phase 1 (46% equity stake) is already commercial, while Phases 2 and 3
(25% stake each) will be catered for the needs of the Refinery and Petrochemical
Integrated Development (RAPID) project.
We view that Dialog‟s long-term value remains attractive – its storage terminal is the
best beneficiary in an oil contango situation, in line with our expectations of long-term
Brent crude of USD80/bbl. As shown in the charts below, Dialog‟s share price has
been relatively defensive despite Brent crude sustaining at around the USD50/bbl
mark. This is a different situation when compared to the oil price slump in 2008-2009,
where Dialog‟s storage terminals did not include the Pengerang Terminal venture at
that time.
Figure 4: Dialog share price vs Brent crude (5-year chart)
160
2.50
140
2.00
120
Figure 5: Dialog share price vs Brent crude (1-year chart)
140
2.00
120
1.90
1.80
100
100
1.50
1.70
80
1.60
80
1.00
60
60
1.50
40
40
0.50
20
0
0.00
1.40
20
1.30
0
1.20
Weekly Europe Brent Spot Price FOB (Dollars per Barrel)
Weekly Europe Brent Spot Price FOB (Dollars per Barrel)
Dialog Price Close
Dialog Price Close
Source: Bloomberg, Energy Information Administration (EIA) (Brent crude oil
price)
See important disclosures at the end of this report
Source: Bloomberg, EIA (Brent crude oil price)
7
Integrated Oil & Gas
2 April 2015
OSV building segment: not all are bad
 AHTS market well-balanced but PSVs seem
overbuilt
AHTS market well-balanced, PSVs are overbuilt. As of March, the global order
book of AHTS stood at 267 vessels, 13.6% of the global fleet of 1,959. Of these 267,
182 are being built in China, where slippage and yard insolvencies may mean that
the true long-term supply might be lower than the 267 figure.
PSVs are looking somewhat overbuilt. This is given the 390 vessels in the global
orderbook (mostly of larger models), 26.6% of the global PSV fleet by vessel count of
1,465. Of these, 230 are being built in China.
Figure 6: 14% AHTS orderbook vs 27% for PSVs
Figure 7: PSV fleet growing at 5x the pace of the AHTS fleet
Source: RS Platou
Source: RS Platou
 Newer vessels are preferred over the aging
AHTS fleets
30% of global AHTS fleet is older than 25 years old, suffering a 35% utilisation
penalty. Offshore technology has improved dramatically in the last two decades.
Vessels older than 25 years are generally smaller, do not possess dynamicpositioning capabilities, and their engines have de-rated to the point that they can no
longer perform typical towing duties and are only suitable for standby support
functions. This is the case for 30% of the global AHTS fleet. These old vessels,
expectedly, suffer lower utilisation vis-à-vis their newer counterparts, and this spread
has widened rapidly to c.35% today from <5% in 2005. As standby support functions
command drastically lower day-rates when compared to the full-service package that
a new vessel can offer, vessel owners increasingly prefer newer vessels equipped
with modern technology. This, in turn, drives asset replacement demand.
Figure 8: Fleet renewal still a driving force
Figure 9: Utilisation spread between old and new vessels
(AHTS and PSV)
Source: Pareto, ODS Petrodata
Source: RS Platou
See important disclosures at the end of this report
8
Integrated Oil & Gas
2 April 2015
 Larger AHTS seem overbuilt
 The smaller AHTS vessels has an older age
profile, is catered to shallow waters and looks
to be under-built
AHTS market looking overbuilt for large units. The global orderbook for the
largest AHTS vessels stands at 22.8% of the 20,000bhp fleet. This segment caters to
deep and ultra-deep water operations, which appears to us to be most at risk in the
current oil price environment. Also, as the oldest deepwater vessels were delivered
relatively recently in 1995, their general age profiles are relatively young and,
therefore, will not enjoy replacement demand in the near term.
Figure 10: Newbuilding activity
Vessel Type
Global Orderbook
Global Fleet
% of orderbook
AHTS 4-7,999 BHP
131
1220
10.7%
AHTS 8-9,999 BHP
45
223
20.2%
AHTS 10-15,999 BHP
62
317
19.6%
AHTS 16-19,999 BHP
11
120
9.2%
AHTS 20,000+ BHP
18
79
22.8%
267
1959
13.6%
70
416
16.8%
PSV 500-749 sq m
98
512
19.1%
PSV 750-899 sq m
120
153
78.4%
PSV 900+ sq m
102
384
26.6%
PSV Total
390
1465
26.6%
Total Orderbook
657
3424
19.2%
AHTS Total
PSV <500 sq m
Source: RS Platou
But under-built for small AHTS vessels <10,000bhp, which also has an older
age profile. On the other hand, the small AHTS market continues to look healthy.
This is primarily because, firstly, shallow water activity continues to be profitable even
with oil prices at c.USD55/barrel and we see this recession-proof segment staying
operationally strong. Secondly, most of the vessels older than 25 years old fall into
this category, and the replacement demand is relatively high. With an orderbook of
only 12.2% (176/1443) of the global fleet for this category, we believe this segment
will continue to see sustained new orders.
 Small AHTS newbuild prices are holding firm
Small AHTS newbuild prices holding firm, large AHTS have seen a 25% fall.
Small AHTS prices at the yards have held firm for the last four years, having never
recovered much from the 2008 crash. Large AHTS, however, have seen prices
rebound to nearly the pre-crisis highs, but these prices have come off c.25% since
mid-2014.
Figure 11: Large AHTS prices falling sharply, small AHTS
stable
Figure 12: PSV prices falling across all segments
Source: RS Platou
Source: RS Platou
See important disclosures at the end of this report
9
Integrated Oil & Gas
2 April 2015
 Both large and small PSV prices are falling
across the board
 Prices are holding up for vessels catered
specifically to the production side of the E&P
business
 Recommend shallow water OSV builders and
owners
 Avoid deepwater players
PSV prices falling across all segments. With the large orderbook-to-fleet ratio for
PSVs, it is hardly surprising that prices have fallen. Prices for both large and small
PSVs have fallen 30-35% since mid-2014 as oil prices began sliding.
Production assets holding up firm. Time series data for production assets (ie
vessels that cater to the production side of the E&P business) like workboats, work
barges and liftboats are not readily available. However, channel checks with builders,
owners and operators indicate that yard prices for these assets are holding up firmly
as oil majors rebalance towards production-focused projects in the near term, away
from upstream exploration efforts.
Shallow water OSV builders and owners should do well. Players like Nam
Cheong and Marco Polo Marine are likely to continue delivering healthy earnings
from OSV-builder or chartering operations, as asset prices and charter rates remain
healthy.
Deepwater players face structural problems. The nosedive in oil prices means
that ultra-deepwater acreage has become uneconomic. Some deepwater areas are
facing similar issues as well. This has caused drillship and semi-submersible (sub) rig
rates to collapse, which has – in turn – sent deepwater OSV prices and charter rates
down sharply. With potentially multiple years before such acreage becomes
economically-viable to develop, players in this segment could be facing a long-term
drought in earnings and charters. Examples of companies in this space are Vard,
Pacc Offshore, EMAS Offshore and Swiber.
OSV operators: slowdown in activities
 Oil majors cut expenditures and have more
stringent cost disciplines now
 Exploration activities the first casualty in a
downturn, thus lower rig count and utilisation
rates
 Deepwater activities to take a backseat for
now, shallow water should still continue
Tough times up ahead. After several years of robust growth for the offshore supply
vessel industry, the current low oil price environment threatens to put a dampener to
the industry as oil majors cut expenditure and practice more stringent cost
disciplines. Demand for OSVs mainly derives from drilling activity (vessels are
needed to put rigs in place), field development work (construction work as well as
transporting structures) and production facility support, ie transporting raw materials,
supplies and personnel.
Slowdown in activities. The first segment to be hit in a low crude oil price
environment is the exploration activities, evident by the low rig count and utilisation
rate. A slowdown in rig activities will most likely affect AHTS vessels, which are
mainly built to handle anchors for rigs, tow them to the specified locations and anchor
them up again. Another segment where we believe there might be a slowdown in
activity would be deepwater exploration due to its higher cost of exploration,
development and production. Rystad Energy expects E&P companies to reduce
deepwater activities by 2% in 2015. We believe that the impact will be felt by high
powered AHTS, ie 10,000bhp and above, which are specifically designed with
deepwater activities in mind. We are already noticing this in data released by RS
Platou in which 10,000bhp AHTS are seeing a drop of about 11% in charter rates visà-vis 2014‟s YTD average.
Our view. In line with the view we outlined in the shipbuilding segment, we believe
deepwater-related vessels might be feeling the pinch as deepwater activity takes a
backseat in the current low oil price environment. However, shallow water OSVs will
still be in demand. This is because they have a lower oil price breakeven price.
Furthermore, most shallow water developments and production ought to still
continue.
Figure 13: South-East Asia average rates
AHTS (bhp)
YTD 2014
Nov-14
% change
5,000
7,000
8,545
11,182
8,000
10,500
-6%
-6%
8,000
10,000
12,000
15,273
19,682
22,727
14,500
17,500
21,000
-5%
-11%
-8%
Source: RS Platou, RHB
See important disclosures at the end of this report
10
Integrated Oil & Gas
2 April 2015
Perspective by country
 Petronas cuts expenditures and renegotiates
contracts, preferring short-term to longer-term
ones
 Large projects are still in the pipeline, but
there may be delays
 Companies with modern fleets and long-term
contracts are preferred
See important disclosures at the end of this report
Malaysia: harsh weather ahead. We believe the Malaysian OSV industry will be
undergoing a painful but necessary consolidation phase in the near to mid-term. This
is due to the threat of lower charter rates from Petronas as exploration and
development projects are cancelled or delayed. Outgoing Petronas president and
group CEO Tan Sri Shamsul Abbas mentioned that the national oil company was
looking to revise locked in long-term charter rates downwards by 15-20%, according
to a StarBiz article. From our channel checks with industry players, Petronas is in
preliminary discussions with the OSV players in Malaysian waters to reduce longterm charter rates with the quantum of reduction still being ironed out. The national oil
company is also moving away from handing out long-term charter contracts to OSV
players. Instead, it is handing out umbrella spot charter contracts in 2015-2017 to
vessel players. Players are awarded these contracts for a specific class of vessel,
which will be on a call-out basis. From what we gathered, the rates for the umbrella
contract will be higher than a typical long-term charter rate one in Malaysian waters.
Note that spot charter rates have always been at a premium to a long-term one.
However, the downside to the attractive rate is the lack of security in terms of
earnings visibility, given that the contracts are on a spot charter and call-out basis.
We are taking this as a signal that Petronas will be extending its cost discipline
regime on OSVs all the way into 2017. However, not all is lost as there are Malaysian
players that have long-term charter contracts under their book, which ought to enable
them to survive through the harsh weather ahead. As such, we believe these longterm contracts and earnings are secured, albeit the rates may be lower than the
original contracts.
Indonesia: not yet out of the doldrums. Indonesia‟s oil production declined from a
peak in 1991 of 1.6mbpd to 0.79mbpd in 2014. In the same period, its energy
demand increased by more than 50%, with oil making up 30% of the country‟s total
energy consumption. Indonesia turned to a net importer of oil in 2004 (from a net
exporter) and the deficit has been increasing ever since as the effect of
underinvestments in exploration activities are felt. To arrest the nation‟s dependency
on oil imports, several major projects are already in the pipeline. These include the
BP‟s USD12bn Tangguh LNG project in Papua, ENI‟s USD4bn Jangkrik field and
Chevron USD7bn Indonesia Deepwater Development (IDD). The increased
investment in upstream activities will surely benefit OSV players, especially in a
cabotage protected market. From our conversation with vessel providers, it is
estimated that the BP‟s Tangguh LNG project will require around 70 OSVs. However,
the falling crude oil price and Indonesia‟s changing political environment are delaying
these major projects. The falling oil prices are forcing companies such as Pertamina
to decrease their capex for 2015 to USD4.4bn, lower than an earlier planned
USD7bn, with 75% of the allocated capex to be spent on the upstream sector. The
Chevron IDD project is facing an 18-month delay as it encounters setbacks in getting
regulatory approvals for its budget, which will definitely affect OSV demand.
Currently, Indonesian players are also seeing a downward revision of charter rates of
5% as oil operators embark on a cost rationalisation schemes. We believe that nearterm horizon will be a challenge for the Indonesian OSV players. However, we are
positive on the Indonesian sector, as we believe investments in the O&G sector will
start to pick up helped along by the current government‟s initiative in reviving the
sector.
For the OSV operators under our coverage, we are still positive on Perdana
Petroleum, Logindo Samudramakmur and Pacific Radiance, as we believe their
modern fleets will continue to be in demand – backed by their long-term charter
contracts. Having said that, we are not discounting the possibility of earnings
fluctuations, as we believe charter rates will be under threat in the current low oil
price environment.
11
Integrated Oil & Gas
2 April 2015
Figure 14: Global OSV fleet by locations
Location
Number of vessels
North Sea
2005
205
2010
259
2015F
359
Gulf of Mexico
2005
432
2010
415
2015F
514
Brazil
2005
111
2010
233
2015F
340
West Africa
2005
184
2010
349
2015F
500
Asia Pacific
2005
297
2010
572
2015F
641
Source: Pareto, ODS Petrodata
Drilling rigs operators: challenging times ahead
 Drilling rigs seem to be in oversupply in
South-East Asian waters
 74 rigs vying for contracts by mid-2015
Oversupply in South-East Asian waters. According to Bloomberg, there are
currently 139 rigs in South-East Asian waters. Out of this total, 85 are currently
drilling, 29 are ready stacked (ie the rig is idle but continues to have a skeleton crew
and is ready for deployment at a moment‟s notice), 10 are cold stacked (the rig is
non-operational and stored in a yard as it is not expected to win a contract for an
extended period of time), five are under construction in Singaporean yards and the
rest are under various stages of deployment or maintenance.
Expiring contracts. By end of June, out of the 85 rigs that are currently drilling, 30
rigs will see their contracts expiring. If we assume that currently idle rigs will not be
securing any contracts, by middle of the year there will be at least 74 rigs that will vie
for contracts in South-East Asian waters. Judging from these numbers, we believe rig
operators will be facing a difficult time in securing new contracts in the current
oversupply situation. Rigs will either have to take lower charter rates or players must
be prepared to cold/warm stack their rigs and incur operational costs until such a time
when oil prices become economical again.
When will rig activity start picking up again? From our checks with industry
experts, a brownfield (ie fields that already have facilities set up) takes one year –
from reservoir studies to be completed to the time when a drill bit hits the seabed. It
ought to take longer than a year for a greenfield development, as the supporting
offshore facilities need to be put in place. We believe that, if the oil price stages a
significant rebound in the second half of 2015, exploration activities will soon follow.
As such, we expect rig activities to start picking up again in the second half of 2016.
See important disclosures at the end of this report
12
Integrated Oil & Gas
2 April 2015
Figure 15: Rig count for South-East Asia
Status
Currently drilling
Ready stacked
Cold stacked
Under construction
Others
Total
Number of rigs
85
29
10
5
10
139
Source: Bloomberg, RHB
 Rule of thumb: seven months lag to the
bottom and seven months to recover
 SELL Perisai and BUY Coastal Contracts
Any correlation? In the course of our discussions, we came up with an interesting
question: Is there a correlation between the utilisation of rigs and crude oil price
movements? We took historical data from the volatile oil price movement and
compared it to the utilisation rate of rigs in South-East Asian waters. What we
observed was that, when oil reached its bottom in Jan 2009, there was a time delay
of seven months before rig utilisation rates fell down to their lowest level of 56%.
When oil prices breached the USD70/bbl level in Oct 2009, there was also a lag of
seven months before rig utilisation rates climbed up to 76%. Note that the current rig
utilisation rate in South-East Asia stands at 78.2% from a high of 90% in Sep 2014. If
we apply the same conclusion to the current situation, and if oil prices reached their
bottom January, then the rig utilisation rate should fall to its lowest in July before
recovering in seven months‟ time, ie by Feb 2016.
Challenging times ahead. Under our coverage, we have Perisai and Coastal
Contracts that are involved in the chartering of jack-up rigs. We continue to have a
SELL call on Perisai as we believe it will be facing difficulty in chartering its second
jack-up rig, which is due to be delivered in mid-2015. Perisai is bidding for 5-6 longterm contracts around the region, but management remains cautiously optimistic
given the current oversupply situation of jack-up rigs in the market. We have a BUY
recommendation on Coastal Contracts, as it is taking efforts in disposing its jack-up
rigs. We also like its strong shipbuilding orderbook.
FPSO operators: down but not out
 FPSO orders are not likely to dry up in 2015,
but the industry is turning more conservative
in its expectations
 Six FPSO contract awards expected in 2015,
down from 10 contracts in 2014
 Long-term contracts remain viable, we do not
expect to see any terminations or reduction in
charter rates with compensation
2015 orders may not dry up. According to IMA in February, more than a dozen
floating production unit (FPU) projects in the advanced planning stage have a high
chance of moving into the engineering, procurement and construction (EPC) phase
this year. These consists of: i) 3-5 FPSO orders in Brazil, ii) two FPSOs and a
floating LNG (FLNG) project in Africa, iii) a production semi-sub in the Gulf of Mexico,
and iv) several floating storage and offloading (FSO) vessels in South-East Asia. This
indicates that FPSO orders may not dry up, unlike the case during the 2009 financial
crisis that caused a 12-month hiatus on FPSO orders. In late January, Yinson
secured 2015‟s first FPSO project (total contract value: USD3.8bn), which will be
used in ENI‟s USD6bn project to develop the Sankofa oil/gas field offshore Ghana.
The industry has turned more conservative. SBM Offshore (SBM) (SBMO NA,
NR), a leading global FPSO player and asset owner, revealed a weaker industry
outlook. SBM sharply lowered its 2015 contract award expectations to six FPSO from
its original estimate of 13. For 2014, the company saw 10 FPSO contracts awarded,
which was slightly lower than its own estimate of 12. The lower expectations are due
to several factors, namely: i) contract delays, ii) E&P players realigning capital
discipline, and iii) the deadlock situation in Brazil with Petrobras (PETR4 BZ, NR). As
such, we see scarce opportunities in 2015 for the Top 6 global FPSO players, ie
SBM, Modec (6269 JP, NR), Bumi Armada, BW Offshore (BWO NO, NR), Teekay
Corp (TK US, NR) and Yinson. Elsewhere, we are seeing the emergence of more
players – which are smaller in capex and simpler in design – competing for FSO
contracts. These include EA Technique (EATECH MK, NR), SapuraKencana
Petroleum (SapuraKencana) (SAKP MK, NEUTRAL, TP: MYR2.34) and Perisai.
Long-term value remains. The industry has rationalised new contract award
expectations, which means that some of the projects in the deepwater or marginal
fields have been delayed/cancelled due to the current low crude oil price
environment. We have lowered our expectations of worldwide FPSO awards annually
to <10 (from 13-16, ie the average for the past 10 years). We believe that the FPSO
segment may be more resilient as it concentrates more on the production side of the
E&P business, albeit in deepwater and marginal fields.
We believe that it is unlikely that contracts that are already awarded will see any
terminations or reduction in charter rates, without compensation. Conversion costs
See important disclosures at the end of this report
13
Integrated Oil & Gas
2 April 2015
are favourable at the moment given that the floater supply chain is trimming
expenses and service costs, to allow for more flexible pricing structure. We believe
that cost from suppliers and conversion costs could see upside adjustments in the
event of a rising oil price environment, although this will not be immediate. On the
positive side, FPSO projects could take between 2-4 years to develop and provide
recurring income stream throughout the contract tenure, which can be as long as 15
years on a firm contract basis.
Risks. i) delays in project planning and final investment decision (FID) – IMA
estimates that around 65% of the projects could reach FID in the next five years while
about 15% may ultimately not proceed to development, ii) ~10% of projects have
alternative production solutions, iii) sizable rig stacking could delay production
projects in the planning pipeline, iv) high project risks (given the changing competitive
landscape for increasingly larger and more complicated FPSO conversions), and v)
cost overruns due to supply chain constraints and challenges of deepwater projects.
According to researchers Erikson and Fuglerud, FPSOs around the world are
experiencing a 20% increases in costs and delays by six months on average, due to:
i) ineffective project budgeting and planning, ii) reworks, and iii) financial support.
 Key risks: delays in FID, rig stacking,
competitive landscape for larger more
complicated FPSOs and cost overruns
 Yinson preferred due to its ability to secure
large contracts and proven execution
Prefer Yinson over Bumi Armada. Both Yinson and Bumi Armada are trading at
10x EV/EBITDA (comparable to the global average), unchanged from six months
ago. Bumi Armada‟s market capitalisation is 0.24x of its MYR24.5bn firm orderbook
(trading at FY15F 15x P/E, 9x EV/EBITDA) while Yinson‟s market capitalisation is
0.24x of its MYR12bn firm orderbook (trading at FY16F 19x P/E, 10x EV/EBITDA).
Although both are trading at similar valuations, we prefer Yinson over Bumi Armada
for its ability to secure large contracts and proven execution. We also believe Yinson
has now emerged to become a more pure-play proxy to the FPSO market vis-à-vis
Bumi Armada. This is because Yinson has more than 85% future earnings from
FPSOs while Bumi Armada only has 50%. We think the counterparty risks of
Yinson‟s FPSO contracts are relatively safe vs Bumi Armada‟s end-clients, providing
less volatility to its cash flow projections.
Figure 16: FPUs in service/on order/available (1 Oct 2014)
FPU
O&G production
FPSO
Production Barge
Production
Semi
submersible
(or
production semi)
Production Spar
Tension Leg Platform
Total
LNG processing
FLNG
FSRU
Storage
FSO
Total
Active
On Order
Available
216
10
163
8
36
2
17
0
48
22
28
324
41
20
24
256
2
2
4
46
5
0
0
22
5
25
0
13
5
12
0
0
102
93
8
1
Source: International Maritime Associates (IMA)
See important disclosures at the end of this report
Figure 17: Planned projects by type and location (1 Oct 2014)
Type
FPSO
Other FPU
FLNG
FSRU
FSO
Total
No.
135
30
34
20
14
233
Location
Africa
Brazil
South-East Asia
GOM
North EU
Australia/ New
Zealand
Mediterranean
South West Asia
Others
No.
49
43
40
24
24
16
Total
233
10
10
17
Source: IMA
14
Integrated Oil & Gas
2 April 2015
Figure 18: SBM’s expectations of FPSO contract awards
Figure 19: SBM’s previous expectations of contract awards
Source: SBM Offshore 2014 presentation
Source: SBM Offshore 1H2014 presentation
Figure 20: 10 FPSO and three FSO awards in 2014
FPSO
Kaombo CLM
Kaombo GGC
Deep Producer 1
Catcher
Armada Ali
Libra EWT
Madura BD
Front Puffin
Tartaruga MV 28
Petrojarl 1
Operator
Saipem (SPM IM, NR)
Saipem
TH Heavy (RH MK, NR)
BW Offshore
Bumi Armada
Teekay/Odebrecht
Bumi Armada
Rubicon
Modec
Teekay
FSO
Nong Yao
Rubicon Vantage
Fois Nautica Tembikai
Omni
Rubicon
EA Technique
Source: IMA
See important disclosures at the end of this report
Figure 21: Competitive landscape
Source: SBM Offshore 2014 presentation
15
Integrated Oil & Gas
2 April 2015
Financial Assessment By Country
Rest assured most will weather this downturn
The lower crude oil price environment has prompted questions of the financial
strength of the O&G service providers under our coverage. We performed a financial
analysis on the service providers in both Singapore and Malaysia. We believe that
most of the stocks under our coverage will be able to withstand this downturn. Most
companies have adequate net gearing and EBITDA interest coverage ratio. Some
companies stand out as being higher leveraged than others. However, these
companies have contracts/cash flows to back the loans while some are forecasted to
have lower gearing going forward. In terms of customer profile, Singapore O&G
service providers are more exposed to companies based in Brazil – eg Petrobras and
Sete Brasil Participacoes (Sete Brasil) for example, Mexico – eg Petroleos
Mexicanos (Pemex) and Malaysia – eg Petronas. The listed O&G companies in
Malaysia are more exposed to Malaysia‟s Petronas.
Singapore: only a few companies are highly leveraged
With the exception of a small number of companies, most O&G players in Singapore
have used gearing rather conservatively and are not at high risk of default. Ezion (EZI
SP, BUY, TP: SGD2.18)‟s gearing – at 0.85x – appears high, but its gearing is
backed by high-quality long-term contracts stretching 3-7 years with low risks of
cancellation or renegotiation. Other players like Nam Cheong and Pacific Radiance
have low net gearing in the 0.3-0.5x range. Still others like GSS Energy (GSSE SP,
BUY, TP: SGD0.65) and RH Petrogas (RHP SP, BUY, TP: SGD0.50) are in a net
cash position. The company with the strongest balance sheet is probably Keppel
Corp (KEP SP, BUY, TP: SGD11.10), which has only a 0.11x net gearing (this
includes the property development and infrastructure divisions) and interest coverage
of 19x.
The companies with the highest net gearings are Vallianz (VALZ SP, NR) at 2.15x,
Vard at 1.88x, Swiber at 1.49x and Ezra (EZRA SP, NEUTRAL, TP SGD0.85) at
1.14x. Some of these companies may indeed bear a high level of balance sheet and
refinancing risks. In particular, Swiber‟s bonds are trading at yields of 14-18%. Ezra‟s
bonds now trade at 9% bid yields to maturity while its callable perpetual trades at
14%.
See important disclosures at the end of this report
16
Integrated Oil & Gas
2 April 2015
Key highlights (Singapore)
 Keppel: net gearing at 0.11x, key risk is Sete
Brasil
Keppel. Keppel's net gearing is relatively low at c.0.11x while its EBITDA interest
coverage is about 22x. Key risk is the high exposure of its orderbook to Sete Brasil.
 SembMarine: net cash, key risk is Sete Brasil
Sembcorp Marine (SembMarine) (SMM SP, NEUTRAL, TP: SGD3.10).
SembMarine is currently in a net cash position and, with an expected cash flow from
operations of SGD813m in 2015, we believe that the solvency risk for the company is
low. Key risk is the high exposure of its orderbook to Sete Brasil.
 Ezion: net gearing at 0.77x with EBITDA
Ezion. We expect Ezion's current net gearing of c.0.86x to fall to 0.77x by 2015F
because of its strong earnings and slower asset additions. Though the current
gearing is relatively high, this is backed by long-term contracts lasting 2-7 years, with
EBITDA interest coverage of 15-17x. Ezion has one of the highest visibilities in terms
of earnings growth and medium-term cash flows among the companies under our
coverage by virtue of these long-term contracts.
interest coverage at 15-17x, backed by longterm contracts
 Nam Cheong: net gearing at 0.42x with
EBITDA interest coverage at 12-14x
 Giken Sakata: net cash
 Pacific Radiance: net gearing at 0.48x with
EBITDA interest coverage of 8x
 Marco Polo Marine: high net gearing at 0.8x
could jump to 1.5x after it takes delivery of a
jack-up rig in 4Q15
 Ezra: high net gearing at 1x with weak
operational results
 Vard: net gearing is high at 1.88x due to a
surge in construction loans and slow
payments
See important disclosures at the end of this report
Nam Cheong. Net gearing is relatively low for Nam Cheong at c.0.42x, with EBITDA
interest coverage at c.12-14x. Its orderbook stands at the record level of MYR1.7bn,
with low cancellation risks because most of its customers have secured contracts or
have high confidence of securing contracts for the vessels ordered from the
company.
Giken Sakata (GSSE SP, BUY, TP SGD0.65): Giken Sakata currently does not have
any debt. The recent equity placement of SGD48m is sufficient for its oilfield
development plans.
Pacific Radiance. The company's net gearing is relatively healthy at 0.48x and
EBITDA interest coverage of 8x. Its vessels are generally deployed on long-term
charter durations of 3-7 years, and the company's strategy of managing its own
building programme in China ensures that its asset acquisition costs are up to 40%
lower than peers. This, in turn, yields long-term competitive advantages in contract
bidding.
Marco Polo Marine. Marco Polo Marine‟s FY15F net gearing is expected to be high
at 0.8x, which may jump to 1.5x after the company takes delivery of a jack-up rig in
4Q15F. The EBITDA interest coverage ratio is healthy at 13x for the current year
and, even after taking delivery of the rig, the ratio is still c.6x after using conservative
assumptions for charter rates and utilisation rates for the rig.
Ezra. Ezra's net gearing remains elevated at 1x, and weak operational results have
brought EBITDA interest coverage ratio to 4.5x this year. The poor operational
performance, combined with high gearing, is the main reason we prefer other
companies with stronger debt-to-operations profiles.
Vard. Vard's net gearing spiked to 1.88x in 4Q14 as a high volume of work led to a
surge in construction loans amidst slow payment terms. Also, we highlight higher
cancellation risks (than Nam Cheong, in our view) for its deepwater vessels and a
poorer mid-term outlook due to its deepwater focus.
17
Integrated Oil & Gas
2 April 2015
Figure 22: Singapore O&G financial highlights I
Keppel
2015
2016
SGDm
SGDm
SembMarine
2015
2016
SGDm
SGDm
Ezion
2015
2016
USDm
USDm
Nam Cheong
2015
2016
MYRm
MYRm
Giken Sakata
2015
2016
SGDm
SGDm
Revenue
14,752.0
14,093.0
6,628.0
6,806.0
548.0
659.0
2,569.0
2,615.0
196.0
358.0
EBITDA
Net profit
2,226.0
1,809.0
2,173.0
1,732.0
892.0
571.0
984.0
608.0
407.0
260.0
497.0
319.0
414.0
363.0
463.0
410.0
95.0
34.0
238.0
88.0
CFO
CFI
CFF
1,271.0
-900.0
-1,203.0
1,989.0
-898.0
-869.0
1,139.0
-498.0
-513.0
807.0
-60.0
-512.0
389.0
-450.0
-79.0
471.0
-300.0
-176.0
298.0
-31.0
-33.0
413.0
-31.0
-249.0
71.0
-44.0
31.0
148.0
-25.0
-49.0
Change in cash
-832.0
221.0
128.0
235.0
-140.0
-5.0
234.0
133.0
58.0
74.0
Beg. cash
Change
Ending cash
5,736.0
-832.0
4,904.0
4,904.0
221.0
5,125.0
1,077.0
128.0
1,205.0
1,205.0
235.0
1,440.0
372.0
-140.0
232.0
232.0
-5.0
227.0
800.0
234.0
1,034.0
1,034.0
133.0
1,167.0
4.0
58.0
62.0
62.0
74.0
136.0
Cost of debt (%)
2.20%
2.20%
3.00%
3.50%
3.00%
3.00%
2.90%
3.20%
N.A
N.A
D/E (%)
Interest coverage ratio
Net D/E (%)
Total D/E (%)
83.7
18.6
44.2
83.7
77.9
17.7
39.4
77.9
44.9
30.0
9.8
44.9
35.6
27.4
net cash
35.6
92.1
8.0
77.4
92.1
78.0
10.1
65.4
78.0
90.7
19.7
21.6
90.7
66.8
23.0
2.3
66.8
Zero debt
EBITDA interest coverage ratio
Net debt/EBITDA (%)
20.5
246.1
20.0
241.9
36.4
37.8
34.3
net cash
12.3
274.3
15.2
220.7
20.7
78.3
24.0
8.9
Major customers:
Transocean, Sete
Brasil
Transocean, Oro
Negro, Petrobras
Pemex, Petrobras,
Maersk
25% of customers are
from Malaysia.
Pertamina
Source: RHB
Figure 23: Singapore O&G financial highlights II
Pacific Radiance
2015
2016
USDm
USDm
Marco Polo
2015
2016
SGDm
SGDm
Ezra
Vard
2015
USDm
2016
USDm
2015
NOKm
2016
NOKm
Revenue
EBITDA
230.0
97.0
279.0
120.0
84.0
46.0
152.0
77.0
1,803.0
167.0
1,991.0
222.0
12,722.0
604.0
12,615.0
655.0
Net profit
78.0
94.0
17.0
34.0
92.0
55.0
366.0
371.0
CFO
CFI
CFF
Change in cash
70.0
-54.0
15.0
31.0
91.0
-36.0
-50.0
5.0
46.0
-87.0
40.0
-1.0
25.0
-202.0
177.0
0.0
105.0
-200.0
-11.0
-106
100.0
-150.0
40
-11
-692.0
-250.0
200.0
-742.0
540.0
-250.0
98.0
389.0
Beg. cash
Change
Ending cash
101.0
31.0
132.0
132.0
5.0
137.0
24.0
-1.0
23.0
23.0
0.0
23.0
174.0
-106.0
68.0
68.0
-11
57.0
2,002.0
-742.0
1,260.0
1,260.0
389.0
1,649.0
Cost of debt (%)
3.50%
4.00%
2.00%
3.70%
3.50%
3.50%
2.00%
2.00%
D/E (%)
Interest coverage ratio
Net D/E (%)
Total debt/equity (%)
EBITDA interest coverage ratio
73.0
7.0
46.3
73.0
9.7
58.0
7.8
33.6
58.0
10.2
92.4
6.2
81.5
92.4
13.4
162.6
3.7
153.2
162.6
5.9
120.8
3.4
115.1
120.8
4.9
118.5
3.1
113.9
118.5
4.6
232.2
4.4
201.3
232.2
6.9
227.7
5.0
188.9
227.7
7.5
Net debt/EBITDA (%)
195.1
134.6
328.0
427.0
557.1
604.8
1,443.6
1,295.3
Major customers:
Pemex, Petrobras, Chevron
Husky Energy, Shell,
Petronas, Kreuz, SMIT
International
Customers in Brazil,
Australia, South-East Asia
Mermaid Maritime Australia,
Farstad Shipping, Island
Offshore
Source: RHB
See important disclosures at the end of this report
18
Integrated Oil & Gas
2 April 2015
Malaysia: most companies are modestly leveraged
We expect the O&G stocks under Malaysian coverage to have an average net
gearing of 0.5x and EBITDA interest coverage of about 5-6x. This is in line with
global average. The companies that we expect to have the highest gearing are
SapuraKencana and Daya Materials (Daya) (DAYA MK, NEUTRAL, TP: MYR0.14)
(net gearing of >1x each). For SapuraKencana, the loans are backed by operating
cash flow items. 70% of the debt is USD borrowings, supported by its existing service
contracts that are mostly denominated in USD. For Daya, there are uncertainties in
its fund-raising process to acquire the remaining 50% stake of two new offshore
construction vessels, which could push its net gearing to >1x.
Key highlights
 SapuraKencana: net gearing at >1x, and debt
to EBITDA of >5x due to equity acquisitions in
Newfield E&P assets and Seadrill‟s tender rig
business
 Daya: net gearing to surge as it seeks
funding for two new offshore construction
vessels
 Perisai: net gearing is manageable at 0.8x,
EBITDA interest coverage ratio at 2.2x. The
company still has to secure a contract for its
second jack-up rig
 Perdana Petroleum: net gearing at 0.9x,
EBITDA interest coverage ratio of 4.6x, the
company will concentrate on higher utilisation
on its current vessels rather than expanding
its fleet
 Alam Maritim: net gearing low at 0.1x but its
lower orderbook is a concern
 Coastal Contracts: in a net cash position. The
company is diversifying from shipbuilding into
rig chartering, but is in the midst of disposing
a jack-up rig. To date the company still has to
secure charter contracts.
See important disclosures at the end of this report
SapuraKencana. SapuraKencana is the only large-cap O&G stock in our coverage
with net gearing currently >1x (124% as at 3QFY15) and the company expects
debt/EBITDA levels to reach >5x, as it signed a USD5bn refinancing facility in 2014
(tenures of up to seven years) to fund its equity acquisitions of Newfield Exploration‟s
(Newfield) (NFX US, NR) E&P assets and Seadrill‟s (SDRL US, NR) tender rig
businesses. Both the company and our forecasts indicate that the net gearing will
only be reduced to <1x in 2-3 years‟ time, and it expects debt/EBITDA to be <3.5x in
that time period. 70% of the debt is USD borrowings, but is backed by its existing
service contracts that are mostly denominated in USD. We remain concerned over
risks that may impact SapuraKencana‟s cash flow, namely: i) counterparty risk with
end-client Petrobras for a major service contract, ii) risks of contract non-renewal for
about 20-40% of its 17 operational tender rig fleet, and iii) risk of lower E&P revenue
and uncertainties in the signing of a gas sales agreement.
Daya. We expect Daya„s net gearing to surge to >0.7x, as it is seeking a heavy fundraising exercise to acquire the remaining 50% stake in two new offshore construction
vessels that will be chartered out to Technip (TEC FP, NR) for a 5-year contract. It is
uncertain if the company is able to complete the fund-raising and acquisition plans on
schedule.
Perisai. Perisai‟s net gearing for FY14 is at 0.8x with an EBITDA interest coverage
ratio of 2.2x, although we believe the coverage ratio will ease to 3.2x in FY15,
provided the company manages to secure a contract for its second jack-up rig. If this
rig did not manage to secure a contract, the EBITDA interest coverage ratio will be at
2.5x.
Perdana Petroleum. Perdana Petroleum ended FY14 with a net gearing of 0.9x with
an EBITDA interest coverage ratio of 4.6x. This ratio should improve in FY15 as the
company will be concentrating on improving current vessel utilisation rather than
expanding the fleet base. The net gearing ratio of the company should improve to
0.6x in FY15, helped by the fact that most of its vessels are on long term charters.
Alam Maritim (AMRB MK, SELL, TP: MYR0.63). Alam Maritim‟s net gearing was
reduced sharply to 0.1x as at 4Q14, partially due to the proceeds of a recent private
placement that had pared down debt and paved the way for its acquisition of a diving
support vessel. We remain concerned over its offshore support vessel orderbook,
which stands at MYR628m (as at January) vs 2013‟s MYR1bn.
Coastal Contracts. We expect Coastal Contracts to remain in a net cash position
(from a net gearing of 0.5x previously), as it looks to dispose of one of its jack-up rigs.
It has two high-specification jack-ups due for delivery in 1H15 and 2H15 respectively.
To date, these rigs have yet to secure a charter contract. The current share price has
factored in risks that both rigs are delivered without contracts, ie factoring in only the
shipbuilding business and placed huge discounts on the rig and chartering divisions.
Coastal Contracts has confirmed that one of the rigs will be sold upon delivery in
1H15. As such, this will alleviate the strain on the balance sheet.
19
Integrated Oil & Gas
2 April 2015
 Dialog: net gearing is 0.5x, where it should be
in a good position to gear up as it further
expanses its business
 Bumi Armada: net gearing at 0.53x and
Dialog. We expect Dialog‟s net gearing to remain in a relatively modest 0.5x (from
net cash a few years ago). This is because cash flow is supported by its business
expansion for the mega Pengerang storage terminals project and investments in
upstream assets.
Bumi Armada. Bumi Armada‟s net gearing level is expected to be reduced to 0.53x
from 0.89x due to its strong cash flow from its current operating FPSOs. As such, the
company‟s EBITDA interest coverage ratio should improve to 4.1x from 3.76x.
EBITDA interest coverage ratio to improve
with better cash flow
Yinson. Yinson‟s net gearing had been reduced to a low of 0.4x from 2.5x a year
ago. This gives the company enough headroom (MYR2bn-3bn) to fund its latest
FPSO project, which will be used for a producing asset in Ghana.
 Yinson: net gearing down to 0.4x now,
allowing for headroom to gear up for an
FPSO project in Ghana
Figure 24: Malaysia O&G financial highlights I
Bumi Armada
2015
2016
Dayang Enterprise
2015
2016
Favelle Favco
2015
2016
Muhibbah Engineering Perdana Petroleum
2015
2016
2015
2016
Wah Seong
2015
2016
Revenue
EBITDA
Net profit
2,664.8
1,274.4
387.0
2,613.2
1,392.2
478.3
1,182.3
329.0
260.3
1,219.2
345.4
279.4
977.6
137.0
86.4
1,013.8
142.1
88.7
1,930.0
217.4
94.6
1,968.8
223.3
99.5
414.9
164.9
97.4
486.4
184.8
118.6
2,355.0
280.0
125.0
2,457.0
302.0
133.0
CFO
CFI
1,251.9
-830.0
1,316.9
-827.9
219.1
-100.0
277.8
-50.0
101.0
-40.0
105.0
-40.0
97.7
-60.0
145.6
-60.0
165.4
-71.0
190.5
-66.0
275.0
-333.0
243.0
-202.0
CFF
Change in cash
-1,001.1
-579.2
-481.3
7.8
-90.7
28.4
-118.4
109.4
-36.2
24.8
-37.1
27.9
-42.1
-4.4
-45.3
40.3
34.0
128.5
3.8
128.3
138.0
80.0
-26.0
15.0
Beg. cash
Change
Ending cash
3,972.2
-579.2
3,392.9
3,032.0
7.8
3,039.8
306.1
28.4
334.5
336.4
109.4
445.8
227.2
24.8
252.0
252.0
27.9
279.9
412.0
-4.4
407.6
407.6
40.3
447.9
101.4
128.5
229.9
231.1
128.3
359.4
245.0
75.0
332.0
332.0
10.0
342.0
Cost of debt
4.80%
4.80%
4.20%
4.20%
3.80%
4.00%
4.00%
4.00%
5.40%
5.40%
3.50%
3.50%
D/E
Interest coverage ratio
Net D/E
90.0
3.0
57.4
80.0
3.1
52.5
10.0
33.8
-
10.0
34.7
-
10.0
72.6
-
10.0
74.5
-
30.0
11.2
-
20.0
12.2
-
90.0
3.8
60.6
80.0
4.1
40.5
105.3
5.2
75.8
106.1
4.7
77.7
Total D/E
EBITDA interest
coverage
Net debt/EBITDA
90.0
80.0
10.0
10.0
10.0
10.0
30.0
20.0
90.0
80.0
105.3
106.1
5.5
3.3
5.0
3.0
50.1
-0.5
80.2
-0.9
96.9
-0.8
156.2
-1.0
6.3
2.8
6.4
2.0
7.6
3.0
7.0
3.1
Major customers:
Eni, CNOOC,
EnQuest, ONGC,
Total
84.6
87.7
0.4
0.4
Hyundai, Nam
Cheong, Keppel,
Petronas, Talisman,
China Merchants,
Murphy, ExxonMobil
Thai Nippon, PPL
Shipyard
Petronas
Petronas, Shell,
Talisman
Statoil, Petronas
Source: RHB
See important disclosures at the end of this report
20
Integrated Oil & Gas
2 April 2015
Figure 25: Malaysia O&G financial highlights II
SapuraKencana
2016
2017
Dialog
2015
2016
Coastal Contracts
2015
2016
Alam Maritim
2015
2016
Daya Materials
2015
2016
Revenue
EBITDA
Net Profit
8,941.0
2.256.0
979.0
8,827.0
2,377.0
1,138.0
3,004.0
337.0
241.0
3,968.0
422.0
307.0
1,237.0
215.0
216.0
1,233.0
281.0
254.0
423.0
70.0
64.0
450.0
82.0
74.0
641.0
67.0
26.0
650.0
84.0
38.0
CFO
CFI
564.0
2,099.0
1,289.0
2,010.0
460.0
-775.0
382.0
-444.0
188.0
-253.0
78.0
-367.0
33.0
-20.0
132.0
-67.0
15.0
-203.0
62.0
-173.0
CFF
Change in cash
1,329.0
-206.0
1.269.0
459.0
83.0
-232.0
-23.0
-85.0
57.0
-8.0
61.0
-228.0
-9.0
4.0
9.0
74.0
154.0
13.0
144.0
35.0
Beg. cash
Change
Ending cash
1,935.0
-206.0
1,729.0
1,729.0
459.0
2,188.0
503.0
-232.0
272.0
272.0
-85.0
188.0
470.0
5.0
475.0
475.0
-215.0
260.0
241.0
4.0
245.0
196.0
74.0
270.0
159.0
13.0
172.0
180.0
35.0
215.0
Cost of debt
4.00%
4.00%
1.20%
1.50%
3.50%
4.00%
5.50%
5.30%
5.29%
5.30%
D/E
Interest coverage ratio
Net D/E
121.1
2.7
107.3
106.8
2.9
90.8
49.9
18.0
49.9
55.9
17.6
55.9
13.1
28.7
-
34.0
14.8
9.4
35.5
1.4
11.8
40.6
1.6
8.8
132.7
2.7
75.8
162.9
3.4
77.7
Total D/E
EBITDA interest coverage
Net debt/EBITDA
121.1
4.1
5.9
106.8
4.5
4.6
56.0
22.5
2.8
62.0
22.2
2.8
13.1
30.0
-
25.9
16.5
0.6
33.8
4.7
1.5
40.6
1.68
1.0
132.7
3.6
3.5
162.9
4.0
4.2
Major customers:
Petronas, Petrobras
Petronas
Petronas, Pemex
Petronas
Technip, Petronas
Petra Energy
Petronas Chemicals
MMHE
Yinson Holdings
Source: RHB
Figure 26: Malaysia O&G financial highlights III
Perisai Petroleum
Teknologi
2015
2016
2015
2016
2015
2016
2015
2016
2016
2017
Revenue
EBITDA
Net Profit
227.7
117.3
51.9
401.0
206.5
100.9
646.8
97.0
63.3
646.8
97.0
63.9
18,403.3
5,890.3
3,758.3
18,586.9
5,948.9
3,775.6
2,185.5
297.9
207.4
1,510.9
145.3
-22.3
1,191.0
281.0
147.0
1,211.0
267.0
144.0
CFO
CFI
CFF
Change in cash
53.4
-493.7
525.8
85.5
131.1
-493.7
351.4
-11.2
56.4
-20.0
-54.4
-17.9
100.7
-20.0
-54.5
26.2
4,480.5
-2,219.0
-663.0
1,598.5
4,309.6
-2,219.0
-547.0
1,543.6
116.2
-159.2
-160.0
8.5
0.0
0.0
-816.5
148.6
181.0
-255.0
18.0
-56.0
196.0
-201.0
20.0
15.0
Beg. cash
Change
Ending cash
66.0
85.5
151.4
351.4
-11.2
340.2
110.9
-17.9
93.0
93.0
26.2
119.1
12,207.0
1,598.5
13,806.6
13,901.0
1,543.6
15,446.6
432.5
8.5
441.0
441.0
148.6
589.6
518.0
-56.0
462.0
462.0
15.0
477.0
Cost of debt
5.3%
5.3%
4.0%
4.0%
3.8%
3.8%
4.8%
4.8%
4.0%
4.2%
D/E
Interest coverage ratio
Net D/E
Total D/E
EBITDA interest coverage
Net debt/EBITDA
176.0
1.6
144.0
176.0
3.4
14.9
187.0
3.1
142.0
187.0
5.0
9.3
23.0
13.7
6.0
23.0
20.6
0.3
15.0
20.6
0.0
15.0
31.4
-0.2
160.2
218.1
-2.3
719.9
991.4
-2.6
5.0
40.9
5.0
51.9
-0.0
5.0
25.3
5.0
25.3
-4.0
86.1
2.2
59.5
86.1
4.2
3.4
105.2
1.7
81.9
105.2
3.4
5.0
Major customers:
Petronas
Petronas, Shell
Technip
Petrovietnam, CNR,
Addax, Vaalco
Source: RHB
See important disclosures at the end of this report
21
Integrated Oil & Gas
2 April 2015
RHB O&G Coverage
Figure 27: RHB O&G coverage I
Ticker
Rating
Target
Price
Thailand
PTT
PTT TB
PTT Exploration & Production
P/BV (x)
P/E (x)
Yield (%)
Dec-15F
Dec-16F
Dec-15F
Dec-16F
Dec-15F
Dec-16F
Buy
378.07
1.2
1.1
8.7
8.5
4.6%
4.7%
PTTEP TB
Neutral
122.53
1.0
1.0
13.1
10.0
2.9%
3.8%
PTT Global Chemical
PTTGC TB
Buy
73.19
0.9
0.9
7.3
6.8
6.1%
6.6%
Thai Oil
TOP TB
Buy
59.49
1.2
1.2
13.1
13.5
3.8%
3.7%
Indorama Ventures PCL
IVL TB
Buy
29.92
1.9
na
26.5
na
1.9%
0.0%
IRPC PCL
IRPC TB
Sell
3.17
1.1
1.1
75.0
12.6
3.3%
19.7%
Bangchak Petroleum
BCP TB
Neutral
29.54
1.2
1.1
9.0
8.8
4.4%
4.5%
Keppel Corp
KEP SP
Buy
11.10
1.5
1.4
9.0
9.4
5.3%
5.3%
Sembcorp Industries
SCI SP
Buy
4.80
1.3
1.2
9.2
8.5
4.1%
4.4%
Sembcorp Marine
SMM SP
Neutral
3.10
1.9
1.8
10.9
10.3
4.3%
4.3%
Yangzijiang Shipbuilding
YZJSGD SP
Buy
1.68
1.0
0.9
6.4
6.2
4.2%
4.2%
Ezion Holdings
EZI SP
Buy
2.18
0.9
0.8
4.9
4.0
0.1%
3.9%
Vard Holdings
VARD SP
Neutral
0.50
0.8
0.7
9.3
9.2
3.0%
3.0%
Ezra Holdings
EZRA SP
Neutral
0.85
0.3
0.3
6.1
4.3
3.6%
3.6%
Pacific Radiance
PACRA SP
Buy
1.24
0.7
0.6
4.7
3.9
5.2%
5.9%
Mencast Holdings
MCAST SP
Buy
0.62
1.0
na
5.3
na
5.3%
0.0%
Nam Cheong
NCL SP
Buy
0.53
1.2
1.0
4.8
4.3
5.7%
6.3%
RH Petrogas
RHP SP
Buy
0.50
1.2
na
na
na
0.0%
0.0%
Ausgroup
AUSG SP
Neutral
0.28
0.7
0.7
19.1
9.9
1.0%
2.0%
MTQ Corp
MTQ SP
Buy
1.43
0.9
0.8
9.2
7.2
4.8%
4.8%
Technics Oil & Gas Ltd
TGH SP
Sell
0.55
2.1
na
51.3
na
1.1%
0.0%
XMH Holdings
XMH SP
Buy
0.30
1.5
1.1
10.8
6.4
4.8%
6.3%
Marco Polo Marine
MPM SP
Buy
0.60
0.5
0.4
5.5
2.7
0.0%
3.6%
Singapore
See important disclosures at the end of this report
22
Integrated Oil & Gas
2 April 2015
RHB O&G Coverage
Figure 28: RHB O&G coverage II
Ticker
Rating
Malaysia
Petronas Chemicals
SapuraKencana
Petroleum
PCHEM MK
Target
Price
P/B (x)
Dec-15F
P/E (x)
Yield (%)
Dec-16F
Dec-15F
Dec-16F
Dec-15F
Dec-16F
Buy
6.22
1.8
1.7
12.9
11.6
3.9%
4.3%
SAKP MK
Neutral
2.34
1.2
1.1
10.5
14.5
0.0%
0.0%
Bumi Armada
BAB MK
Neutral
1.26
4.9
4.4
34.5
27.1
1.2%
1.5%
Dialog
DLG MK
Buy
1.65
0.9
0.8
14.9
13.3
1.7%
1.9%
MMHE
Perisai Petroleum
Teknologi
MMHE MK
Sell
1.20
0.7
0.7
17.1
207.0
0.0%
0.0%
PPT MK
Sell
0.51
0.6
0.5
18.6
9.6
0.0%
0.0%
Dayang Enterprise
DEHB MK
Buy
3.40
2.0
1.7
9.2
7.4
5.4%
6.8%
Yinson Holdings
YNS MK
Buy
4.50
2.0
1.9
18.9
19.7
0.0%
0.0%
Coastal Contract
COCO MK
Buy
4.30
1.2
1.1
8.1
6.8
3.1%
3.7%
Wah Seong
WSC MK
Buy
1.80
0.9
0.8
7.8
7.4
5.1%
5.4%
Perdana Petroleum
PETR MK
Buy
1.53
1.3
1.1
10.9
8.0
0.0%
0.0%
Alam Maritim
AMRB MK
Sell
0.63
0.7
0.7
9.8
8.6
0.0%
0.0%
Muhibbah Engineering
MUHI MK
Buy
2.65
1.3
1.2
9.1
8.6
2.2%
2.3%
Petra Energy
PENB MK
Buy
1.93
0.8
0.8
6.8
7.4
4.1%
3.8%
Favelle Favco
FFB MK
Buy
3.67
1.1
1.0
6.7
6.5
6.0%
6.1%
Daya Materials
DAYA MK
Neutral
0.14
0.8
0.7
7.5
5.7
2.3%
3.0%
Indonesia
Perusahaan Gas
Negara
PGAS IJ
Buy
6,600.00
2.5
2.1
9.6
8.6
4.9%
5.2%
AKR Corporindo
AKRA IJ
Buy
5,650.00
3.1
2.7
18.5
13.7
1.7%
2.2%
Wintermar Offshore
Logindo
Samudramakmur
WINS IJ
Neutral
1,270.00
0.7
na
4.9
na
1.3%
0.0%
LEAD IJ
Buy
6,200.00
0.6
0.5
3.5
2.8
0.0%
0.0%
Hong Kong
Anton Oilfield Services
Group
3337 HK
Sell
0.93
1.1
1.1
na
na
0.0%
0.0%
Hilong Holding Ltd
1623 HK
Buy
3.19
0.8
0.7
6.2
5.4
2.5%
2.9%
SPT Energy Group
1251 HK
Neutral
1.15
0.8
0.7
9.3
7.2
2.7%
3.4%
See important disclosures at the end of this report
23
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates‟ clients generally or such
persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and
the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed
as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments.
This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB‟s
strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such
information and accordingly investors should make their own informed decisions before relying on the same.
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state,
country or other jurisdiction where such distribution, publication, availability or use would be contrary to the applicable laws or regulations. By accepting
this report, the recipient hereof (i) represents and warrants that it is lawfully able to receive this document under the laws and regulations of the jurisdiction
in which it is located or other applicable laws and (ii) acknowledges and agrees to be bound by the limitations contained herein. Any failure to comply with
these limitations may constitute a violation of applicable laws.
All the information contained herein is based upon publicly available information and has been obtained from sources that RHB believes to be reliable and
correct at the time of issue of this report. However, such sources have not been independently verified by RHB and/or its affiliates and this report does not
purport to contain all information that a prospective investor may require. The opinions expressed herein are RHB‟s present opinions only and are subject
to change without prior notice. RHB is not under any obligation to update or keep current the information and opinions expressed herein or to provide the
recipient with access to any additional information. Consequently, RHB does not guarantee, represent or warrant, expressly or impliedly, as to the
adequacy, accuracy, reliability, fairness or completeness of the information and opinion contained in this report. Neither RHB (including its officers,
directors, associates, connected parties, and/or employees) nor does any of its agents accept any liability for any direct, indirect or consequential losses,
loss of profits and/or damages that may arise from the use or reliance of this research report and/or further communications given in relation to this report.
Any such responsibility or liability is hereby expressly disclaimed.
Whilst every effort is made to ensure that statement of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion
and other subjective judgments contained in this report are based on assumptions considered to be reasonable and must not be construed as a
representation that the matters referred to therein will occur. Different assumptions by RHB or any other source may yield substantially different results
and recommendations contained on one type of research product may differ from recommendations contained in other types of research. The
performance of currencies may affect the value of, or income from, the securities or any other financial instruments referenced in this report. Holders of
depositary receipts backed by the securities discussed in this report assume currency risk. Past performance is not a guide to future performance. Income
from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the
interest of investors.
This report does not purport to be comprehensive or to contain all the information that a prospective investor may need in order to make an investment
decision. The recipient of this report is making its own independent assessment and decisions regarding any securities or financial instruments referenced
herein. Any investment discussed or recommended in this report may be unsuitable for an investor depending on the investor‟s specific investment
objectives and financial position. The material in this report is general information intended for recipients who understand the risks of investing in financial
instruments. This report does not take into account whether an investment or course of action and any associated risks are suitable for the recipient. Any
recommendations contained in this report must therefore not be relied upon as investment advice based on the recipient's personal circumstances.
Investors should make their own independent evaluation of the information contained herein, consider their own investment objective, financial situation
and particular needs and seek their own financial, business, legal, tax and other advice regarding the appropriateness of investing in any securities or the
investment strategies discussed or recommended in this report.
This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend”
and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking
statements are based on assumptions made and information currently available to RHB and are subject to known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or
achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this
report should not place undue reliance on any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of
unanticipated events.
24
The use of any website to access this report electronically is done at the recipient‟s own risk, and it is the recipient‟s sole responsibility to take precautions
to ensure that it is free from viruses or other items of a destructive nature. This report may also provide the addresses of, or contain hyperlinks to,
websites. RHB takes no responsibility for the content contained therein. Such addresses or hyperlinks (including addresses or hyperlinks to RHB own
website material) are provided solely for the recipient‟s convenience. The information and the content of the linked site do not in any way form part of this
report. Accessing such website or following such link through the report or RHB website shall be at the recipient‟s own risk.
This report may contain information obtained from third parties. Third party content providers do not guarantee the accuracy, completeness, timeliness or
availability of any information and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results
obtained from the use of such content. Third party content providers give no express or implied warranties, including, but not limited to, any warranties of
merchantability or fitness for a particular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary,
compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in
connection with any use of their content.
The research analysts responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or
her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously.
The research analysts that authored this report are precluded by RHB in all circumstances from trading in the securities or other financial instruments
referenced in the report, or from having an interest in the company(ies) that they cover.
RHB and/or its affiliates and/or their directors, officers, associates, connected parties and/or employees, may have, or have had, interests in the securities
or qualified holdings, in subject company(ies) mentioned in this report or any securities related thereto and may from time to time add to or dispose of, or
may be materially interested in, any such securities. Further, RHB and/or its affiliates may have, or have had, business relationships with the subject
company(ies) mentioned in this report and may from time to time seek to provide investment banking or other services to the subject company(ies)
referred to in this research report. As a result, investors should be aware that a conflict of interest may exist.
The contents of this report is strictly confidential and may not be copied, reproduced, published, distributed, transmitted or passed, in whole or in part, to
any other person without the prior express written consent of RHB and/or its affiliates. This report has been delivered to RHB and its affiliates‟ clients for
information purposes only and upon the express understanding that such parties will use it only for the purposes set forth above. By electing to view or
accepting a copy of this report, the recipients have agreed that they will not print, copy, videotape, record, hyperlink, download, or otherwise attempt to
reproduce or re-transmit (in any form including hard copy or electronic distribution format) the contents of this report. RHB and/or its affiliates accepts no
liability whatsoever for the actions of third parties in this respect.
The contents of this report are subject to copyright. Please refer to Restrictions on Distribution below for information regarding the distributors of this
report. Recipients must not reproduce or disseminate any content or findings of this report without the express permission of RHB and the distributors.
The securities mentioned in this publication may not be eligible for sale in some states or countries or certain categories of investors. The recipient of this
report should have regard to the laws of the recipient‟s place of domicile when contemplating transactions in the securities or other financial instruments
referred to herein. The securities discussed in this report may not have been registered in such jurisdiction. Without prejudice to the foregoing, the
recipient is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this
report.
RESTRICTIONS ON DISTRIBUTION
Malaysia
This report is issued and distributed in Malaysia by RHB Research Institute Sdn Bhd. The views and opinions in this report are our own as of the date
hereof and is subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a
recipient, our obligations owed to such recipient therein are unaffected. RHB Research Institute Sdn Bhd has no obligation to update its opinion or the
information in this report.
Thailand
This report is issued and distributed in the Kingdom of Thailand by RHB OSK Securities (Thailand) PCL, a licensed securities company that is authorised
by the Ministry of Finance, regulated by the Securities and Exchange Commission of Thailand and is a member of the Stock Exchange of Thailand. The
Thai Institute of Directors Association has disclosed the Corporate Governance Report of Thai Listed Companies made pursuant to the policy of the
Securities and Exchange Commission of Thailand. RHB OSK Securities (Thailand) PCL does not endorse, confirm nor certify the result of the Corporate
Governance Report of Thai Listed Companies.
Indonesia
This report is issued and distributed in Indonesia by PT RHB OSK Securities Indonesia. This research does not constitute an offering document and it
should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen
or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations
must comply with the prevailing Indonesian laws and regulations.
25
Singapore
This report is issued and distributed in Singapore by RHB Research Institute Singapore Pte Ltd and it may only be distributed in Singapore to accredited
investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as
amended from time to time. By virtue of distribution to these categories of investors, RHB Research Institute Singapore Pte Ltd and its representatives are
not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of RHB Research Institute Singapore
Pte Ltd ‟s interest and/or its representative's interest in securities). Recipients of this report in Singapore may contact RHB Research Institute Singapore
Pte Ltd in respect of any matter arising from or in connection with the report.
Hong Kong
This report is issued and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (興業僑豐證券有限公司) (CE No.: ADU220) (“RHBSHK”)
which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) and Type 4 (advising on securities) regulated
activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact RHB OSK Securities Hong Kong
Limited.
United States
This report was prepared by RHB and is being distributed solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the
requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). RHB is not registered as a brokerdealer in the United States and does not offer brokerage services to U.S. persons. Any order for the purchase or sale of the securities discussed herein
that are listed on Bursa Malaysia Securities Berhad must be placed with and through Auerbach Grayson (“AG”). Any order for the purchase or sale of all
other securities discussed herein must be placed with and through such other registered U.S. broker-dealer as appointed by RHB from time to time as
required by the Exchange Act Rule 15a-6.
This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as
applicable.
Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified
as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such other registered U.S. broker-dealer as
appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority
(“FINRA”) rules on communications with a subject company, public appearances and personal trading.
Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-U.S.
issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-U.S. securities
or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements
comparable to those in the United States.
The financial instruments discussed in this report may not be suitable for all investors.
Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States.
OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST
Malaysia
RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for:
a)
RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except for:
a)
RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered in this report in the
last 12 months except for:
a)
RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for:
a)
Thailand
RHB OSK Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests
and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB OSK Securities
(Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should
exercise their own judgment carefully before making any investment decisions.
26
Indonesia
PT RHB OSK Securities Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of
affiliation above.
Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows:
1.
Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically;
2.
Affiliation between parties to the employees, Directors or Commissioners of the parties concerned;
3.
Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same;
4.
Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company;
5.
Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or
6.
Affiliation between the Company and the main Shareholders.
PT RHB OSK Securities Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as
insider information prohibited by law.
Insider means:
a. a commissioner, director or employee of an Issuer or Public Company;
b.
a substantial shareholder of an Issuer or Public Company;
c.
an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company, has access to
inside information; and
d.
an individual who within the last six months was a Person defined in letters a, b or c, above.
Singapore
RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this
report, except for:
(a)
The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions
of any issuer whose securities are covered in this report, except for:
(a)
RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had
any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1%
or more in the securities covered in this report) that may create a potential conflict of interest, except for:
(a)
Hong Kong
RHBSHK or any of its group companies may have financial interests in in relation to an issuer or a new listing applicant (as the case may be) the securities
in respect of which are reviewed in the report, and such interests aggregate to an amount equal to or more than (a) 1% of the subject company‟s market
capitalization (in the case of an issuer as defined under paragraph 16 of the Code of Conduct for Persons Licensed by or Registered with the Securities
and Futures Commission (the “Code of Conduct”); and/or (b) an amount equal to or more than 1% of the subject company‟s issued share capital, or issued
units, as applicable (in the case of a new listing applicant as defined in the Code of Conduct). Further, the analysts named in this report or their associates
may have financial interests in relation to an issuer or a new listing applicant (as the case may be) in the securities which are reviewed in the report.
RHBSHK or any of its group companies may make a market in the securities covered by this report.
RHBSHK or any of its group companies may have analysts or their associates, individual(s) employed by or associated with RHBSHK or any of its group
companies serving as an officer of the company or any of the companies covered by this report.
RHBSHK or any of its group companies may have received compensation or a mandate for investment banking services to the company or any of the
companies covered by this report within the past 12 months.
Note: The reference to “group companies” above refers to a group company of RHBSHK that carries on a business in Hong Kong in (a) investment
banking; (b) proprietary trading or market making; or (c) agency broking, in relation to securities listed or traded on The Stock Exchange of Hong Kong
Limited.
27
Kuala Lumpur
Hong Kong
Singapore
RHB Research Institute Sdn Bhd
Level 11, Tower One, RHB Centre
Jalan Tun Razak
Kuala Lumpur
Malaysia
Tel : +(60) 3 9280 2185
Fax : +(60) 3 9284 8693
RHB OSK Securities Hong Kong Ltd.
th
12 Floor
World-Wide House
19 Des Voeux Road
Central, Hong Kong
Tel : +(852) 2525 1118
Fax : +(852) 2810 0908
RHB Research Institute Singapore
Pte Ltd (formerly known as DMG & Partners Research
Pte Ltd)
10 Collyer Quay
#09-08 Ocean Financial Centre
Singapore 049315
Tel : +(65) 6533 1818
Fax : +(65) 6532 6211
Jakarta
Shanghai
Phnom Penh
PT RHB OSK Securities Indonesia
Wisma Mulia, 20th Floor
Jl. Jend. Gatot Subroto No. 42
Jakarta 12710, Indonesia
Tel : +(6221) 2783 0888
Fax : +(6221) 2783 0777
RHB OSK (China) Investment Advisory Co. Ltd.
Suite 4005, CITIC Square
1168 Nanjing West Road
Shanghai 20041
China
Tel : +(8621) 6288 9611
Fax : +(8621) 6288 9633
RHB OSK Indochina Securities Limited
No. 1-3, Street 271
Sangkat Toeuk Thla, Khan Sen Sok
Phnom Penh
Cambodia
Tel: +(855) 23 969 161
Fax: +(855) 23 969 171
Bangkok
RHB OSK Securities (Thailand) PCL
10th Floor, Sathorn Square Office Tower
98, North Sathorn Road, Silom
Bangrak, Bangkok 10500
Thailand
Tel: +(66) 2 862 9999
Fax : +(66) 2 862 9799
28
Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2014
Excellent
BAFS
BCP
BTS
CPN
EGCO
GRAMMY
HANA
INTUCH
IRPC
IVL
KBANK
KKP
KTB
MINT
PSL
PTT
PTTEP
PTTGC
SAMART
SAMTEL
SAT
SC
SCB
SE-ED
SIM
SPALI
TISCO
TMB
TOP
Very Good
AAV
ACAP
ADVANC
ANAN
AOT
ASIMAR
ASK
ASP
BANPU
BAY
BBL
BECL
BIGC
BKI
BLA
BMCL
BROOK
CENTEL
CFRESH
CIMBT
CK
CNT
CPF
CSL
DELTA
DRT
DTAC
DTC
EASTW
EE
ERW
GBX
GC
GFPT
GUNKUL
HEMRAJ
HMPRO
ICC
KCE
KSL
LANNA
LH
LHBANK
LOXLEY
LPN
MACO
MC
MCOT
NBC
NCH
NINE
NKI
NMG
NSI
OCC
OFM
PAP
PE
PG
PHOL
PJW
PM
PPS
PR
PRANDA
PS
PT
QH
RATCH
ROBINS
RS
S&J
SAMCO
SCC
SINGER
SIS
SITHAI
SNC
SNP
SPI
SSF
SSI
SSSC
STA
SVI
TCAP
TF
THAI
THANI
THCOM
TIP
TIPCO
TK
TKT
TNITY
TNL
TOG
TRC
TRUE
TSTE
TSTH
TTA
TTW
TVO
UAC
VGI
VNT
WACOAL
Good
2S
AF
AH
AHC
AIT
AJ
AKP
AKR
AMANAH
AMARIN
AMATA
AP
APCO
APCS
AQUA
ARIP
AS
ASIA
AYUD
BEAUTY
BEC
BFIT
BH
BJC
BJCHI
BOL
BTNC
BWG
CCET
CGD
CGS
CHOW
CI
CKP
CM
CMR
CSC
CSP
CSS
DCC
DEMCO
DNA
EA
ESSO
FE
FORTH
FPI
GENCO
GL
GLOBAL
GLOW
GOLD
HOTPOT
HTC
HTECH
HYDRO
IFS
IHL
INET
IRC
IRCP
ITD
KBS
KGI
KKC
KTC
L&E
LRH
LST
MAJOR
MAKRO
MATCH
MBK
MBKET
MEGA
MFC
MFEC
MJD
MODERN
MONO
MOONG
MPG
MTI
NC
NTV
NUSA
NWR
NYT
OGC
OISHI
PACE
PATO
PB
PDI
PICO
PPM
PPP
PREB
PRG
PRIN
PTG
QLT
QTC
RCL
SABINA
SALEE
SCBLIF
SCCC
SCG
SEAFCO
SEAOIL
SFP
SIAM
SIRI
SKR
SMG
SMK
SMPC
SMT
SOLAR
SPC
SPCG
SPPT
SST
STANLY
STEC
STPI
SUC
SWC
SYMC
SYNEX
SYNTEC
TASCO
TBSP
TEAM
TFD
TFI
THANA
THIP
THREL
TIC
TICON
TIW
TKS
TLUXE
TMI
TMT
TNDT
TPC
TPCORP
TRT
TRU
TSC
TTCL
TUF
TVD
TWFP
UMI
UP
UPF
UPOIC
UT
UV
UWC
VIH
WAVE
WHA
WIN
WINNER
YUASA
ZMICO
IOD (IOD Disclaimer)
การเปิดเผลผลการสารวจของสมาคมส่งเสริมสถาบันกรรมการบริษัทไทย (IOD) ในเรื่องการกากับดูแลกิจการ (Corporate Governance) นี้เป็นการ
ดาเนินการตามนโยบายของสานักงานคณะกรรมการกากับหลักทรัพย์และตลาดหลักทรัพย์ โดยการสารวจของ IOD เป็นการสารวจและประเมินจากข้อมูลของบรษัทจด
ทะเบียนในตลาดหลักทรัพย์แห่งประเทศไทยและตลาดหลักทรัพย์เอ็มเอไอ ที่มีการเปิดเผยต่อสาธารณะและเป็นข้อมูลที่ผลู้ งทุนทั่วไปสามารถเข้าถึงได้ ดังนั้นผลสารวจ
ดังกล่าวจึงเป็นการนาเสนอในมุมมองของบุคคลภายนอกโดยไม่ได้เป็นการประเมินการปฏิบัติและมิได้มีการใช้ข้อมูลภายในในการประเมิน
อนึ่ง ผลการสารวจดังกล่าว เป็นผลการสารวจ ณ วันที่ปรากฎในรายงานการกากับดูและกิจการบริษัทจดทะเบียนไทยเท่านั้น ดังนั้นผลการสารวจจึงอาจ
เปลี่ยนแปลงได้ภายหลังวันดังกล่าว ทัง้ นี้บริษัทหลักทรัพย์ อาร์เอสบี โอเอส เค จากัด (มหาชน) มิได้ยืนยันหรือรับรองถึงความถูกต้องของผลการสารวจดังกล่าวแต่อย่างใด