Analyst calls for June 27
KUALA LUMPUR, June 27 — This is a selection of morning calls by local research houses for the day.
From RHB Research
Sector Update – Oil & Gas
Crude oil prices have weakened by 26-27 per cent from the high levels of US$124/bbl for Brent, and US$110/bbl for WTI crude in Feb-Mar 2012. We are lowering our crude oil price assumption (based on the average of WTI and Brent) to US$95/bbl for 2012 and 2013, from US$105/bbl previously. YTD, the “blended” crude oil price has averaged approximately US$106/bbl.
Despite the weaker crude oil price outlook, we understand that O&G players remain positive on contract flows moving forward, as they expect Petronas to remain committed to its RM300bn capex plans (for 2012-2016).
Although sector earnings remain visible underpinned by domestic contract flows, the recent pull-back in crude oil prices coupled with a higher possibility of another economic slowdown have prompted us to revisit our sector valuations. We now assume a PE multiple for the sector of 14x (from 15x CY12 EPS previously) to reflect the weaker sentiment on the O&G sector, underpinned by weaker crude oil price outlook.
As such, we downgrade our call on the sector to Neutral (from Overweight).
After slipping below the psychological mark of 1,600 yesterday, the FBM KLCI would probably strive to recover parts of the losses ahead. From a technical perspective, the benchmark index is expected to swing sideways with a marginal positive bias today.
Meanwhile, leading stock indices on Wall Street were up between 0.3 per cent and 0.6 per cent last night as sentiment was lifted by better US housing data.
Among the counters that may be in the limelight on our local bourse today include: (a) UMW Holdings, which has agreed to acquire an oil & gas company together with a rig for US$214m; (b) TSH Resources, following its proposed joint takeover offer of one plantation company for a total consideration of RM625m; and (c) Muhibbah Engineering, after announcing that a bank has withdrawn its support pertaining to a proposed restructuring scheme of its Asia Petroleum Hub project in Johor.
From OSK Research
Hang Seng Index Futures- The Battle of 19,000
Selling returned as anticipated as the convergence of both the 50-day and 200-day MAV lines at 19,500 pts proved hard to break. Weakness is underlined by the 21 June “Long Black Day” and the gap down that followed. Thus, the index is moving back in line with the downtrend that started since the false breakout of 21,500 pts back in February. The 4-month series of lower highs is clearly illustrated by the downtrend line and the index is also below both the 50-day and 200-day MAV lines. In fact, the 50-day MAV line has now crossed below the 200-day MAV line, a longer term bearish indication called the “Death Cross”. Nonetheless, the upward bias from the early June strong rebound arising from the oversold daily RSI is not cancelled. A full bodied white candle with a close back above 19,000 pts underlines the buying support.
* These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.