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Idea Of The Week: Oil & Gas
Tradeable, Tradeable Ideas | 23 May 2013
By: Raymond Leung
Articles (142) Profile

Based on the last five trading days (16 May 2013 to 22 May 2013), the FTSE ST Oil & Gas Index had gained 1.49 percent, trading close to 754 from 738. Analysts across the board remain positive on the outlook of the sector and expect it to remain robust after most components of the index released their quarterly financial results. Results for this quarter for most companies have met or exceeded analysts’ expectation of lower profits due to lower profit margin from the rising cost of operation  To further narrow down, we will be focusing on the top featured company by analysts in this sector; Vard Holdings.

FTSE Oil & Gas (5 Trading Days)


Source: Yahoo Finance

Vard Holdings received five “Buy” and one “Hold” ratings backed by its strong order book, positive outlook of the company and the belief that the company is currently undervalued. Yeak Chee Keong of Maybank Kim Eng commented on his report: “Current valuations are unjustifiably low for a premium OSV builder with ROE in excess of 20 percent, strong recovery growth and attractive dividend yield of 5 percent to 6 percent.” He reiterated his “Buy” call with target price of $1.65, pegged to 9 times price-earnings ratio on average FY13 to FY15 earnings per share estimates. He made marginal change to the target price due to higher order wins assumption and NOK/SGD exchange rate adjustments. Vard Holdings have an average upside of 36.28 percent based on the estimate price of 6 analysts from Macquarie, OSK, OCBC, Maybank Kim Eng, DBS Vickers and Credit Suisse.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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