Marine Sector Research Report

by DBS Group Research (20 Aug)

EARNINGS season in H1 2008 has reinforced positive outlook for rig builders, as well as oil and gas service and equipment suppliers. The rig builders, as well as oil and gas service and equipment players, have to-date delivered collectively stronger than expected H1 2008 report cards, underscoring their ability to ride on the positive sector outlook and protect profit margins despite raw material price concerns and weak US dollar.

Indeed, SGX-listed Singapore yards, and oil and gas service and equipment players' earnings have escaped the concerns earlier in the year unscathed; with new orders holding up, and ironically, US dollar rebounding and raw material price concerns easing recently. The exceptions were SGX-listed Chinese yards' earlier-than-expected dip in profit margins, which we had warned since mid-Q1 2008.

Undiscerning selldown in share prices in line with general market weakness has created buying opportunities. In our opinion, the earnings for most SGX-listed Singapore yards and oil and gas service and equipment suppliers have caught up with their share price valuations since early 2008, and the scenario has now reversed for the current depressed share prices to rebound, underpinned by the firm industry fundamentals and successful business execution.

Easing oil prices are positive for the durability of oil and gas industry up-cycle. We have repeatedly mentioned since last August that too high an oil price may result in demand destruction and harm the orderbook replenishment opportunities of stocks exposed to the booming offshore segment.

While the equity market sees the recent cooling off in crude oil price negatively, we are taking the view that the recent retracement in oil prices is reducing the risk of demand destruction and inflationary pressures. This is positive for more new order wins ahead.

This is also in line with rig builders' and oil and gas service and equipment suppliers' feedback that oil price at US$70 per barrel is a good level for their business outlook.

Sembcorp Marine is our top pick among the yards; with price catalyst coming from a possible record level of order wins this year and improving margins from successful execution of its record order book.

Swiber Holdings and Ezra Holding remain our top picks among the oil and gas service and equipment suppliers, as both companies have strong market positioning to ride on the increasing shift to production phases for offshore oil fields.

-Research Report by DBS Group Research (20 Aug)

CH Offshore Research Report

by Kim Eng Research (23 July)

CH OFFSHORE (CHO) has been carrying out a series of disposals and purchases over the last two years to revitalise its fleet and expand its capabilities to operate in deeper water. With its renewed fleet, CHO is in a sweet spot to capture this oil and gas (O&G) offshore sector upswing.

We estimate that CHO will gain US$12 million from the disposal of the last four vessels built before 1984, which will be accounted for by FY2009. As of FY2010, the group will have a relatively young fleet of 15 vessels, all less than 10 years of age, far lower than the global age of 25 years for anchor handling tug supply vessels.

Its total capacity will be boosted by 56 per cent to 136,306 brake horse-power. Net gearing will remain at a low of 10-20 per cent after financing for the newbuilds. We estimate that the Ebit contribution from its total fleet will be US$54 million by 2010.

Based on our estimates, if Scomi Marine sells its 29 per cent stake in CHO, it would be sacrificing a sizeable share of the associates' profits in the amount of US$12 million-US$14 million, as well as an estimated S$3 million-S$10 million in cash dividends in FY2008-10. We believe that Scomi shareholders are unlikely to cash out from this growing cash cow in the short term.

CHO will likely flourish in the next two years as newbuilds come on-stream, and it is expected to rake in pre-exceptional EPS y-o-y growth of 70 per cent in 2009 and 40 per cent in 2010. We estimate CHO's FY2008 RNAV to be conservative at US$282 million or around S$0.55 per share, translating into a mere 1.1 times RNAV.

CHO, a forgotten gem in the making, is relatively cheap in terms of prospective PE and enterprise value/Ebitda.

-Research Report by Kim Eng Research (23 July)

CH Offshore 180208

If you had read my posting on 11 feb, you would have been watching for the signal to enter. The signal for CH Offshore came on 15 feb when it broke above the long term downtrend support (low red) with volume.



I've just added a short term uptrend channel (green). CH Offshore is also trading quite near the long term downtrend resistance (upp red) so expect some profit taking.

For tomorrow :

Support @ 0.630 (low green), 0.605 (upp green --), 0.583 (low green --)
Resistance @ 0.640 (upp red), 0.656 (upp green)

Good Luck !!

CH Offshore 110208

Nothing much has changed for CH Offshore since our last discussion on 31 jan. From the chart, we can see that CH Offshore is trading nearer and nearer to the downtrend resistance (upp pink).



If CH Offshore fails to break that, we may see it trading in the lower downtrend channels (red --)

For tomorrow :

Support @ 0.524 (upp red --), 0.502 (mid red --, low pink)
Resistance @ 0.560 (upp pink), 0.576 (red)

Good Luck !!

CH Offshore 310108

Since our last discussion on 28 jan, CH Offshore still looks to be going sideways for the time being.



Watch for volume if breakout is seen.

For tomorrow :

Support @ 0.530 (mid red --, upp pink --), 0.500 (mid pink --), 0.49 (low red --)
Resistance @ 0.552 (upp red --), 0.556 (low pink)

Good Luck !!

CH Offshore 280108

Another counter that should be going sideways for the time being. We should see CH Offshore trading within the downtrend channel (upp/mid pink - -) if it fails to break the downtrend support (mid red) soon.



For tomorrow :

Support @ 0.534 (mid pink - -), 0.486 (low pink - -), 0.480 (low red)
Resistance @ 0.560 (mid red, upp pink - -), 0.590 (low pink)

Good Luck !!

CH Offshore 230108

As discussed on 11 jan, after breaking the psychological support of 0.780, CH Offshore tumbled before finding some support @ 0.560 on 16 jan.



From the chart, we can see that CH Offshore is now trading below many support. It did, however, managed to find some support along the lower 2 trendlines (low red, low pink - -).

If CH Offshore maintains this downtrend, we may see it testing 0.450 next week, as indicated by the merging of the bottom 2 support trendlines (low red and low pink - -).

For tomorrow :

Support @ 0.520 (low pink - -), 0.500 (low red)
Resistance @ 0.562 (upp pink - -), 0.578 (upp red)

Good Luck !!

CH Offshore 110108

CH Offshore finally broke down when it failed to support the neckline (0.755) of the double-bottom it was forming since it started to go on a downtrend from nov onwards.



You can see CH Offshore is now trading below many support and resistance trend lines. So it might be a while before we can see CH Offshore reversing its downtrend.

For monday :

Support @ 0.7105 (middle red, lower pink), 0.683 (lower red)
Resistance @ 0.7522 (upper red), 0.763 (upper pink), 0.7711, 0.780

Good Luck !!

CH Offshore 040108

CH Offshore managed to trade above the long term downtrend resistance (red) and closed just on the long tern uptrend support (blue).



It will be interesting to see if CH Offshore can maintain its uptrend momentum on Monday. I've added in a new uptrend channel (green).

For Monday :

Support @ 0.7966 (lower green), 0.785 (red), 0.780 (red dashed)
Resistance @ 0.821 (blue), 0.8316 (upper green),0.8368 (blue)

Good Luck !!

CH Offshore 311207

Seeing that CH Offshore seems to be moving sideways, I've simplified things.



As you can see from the 2 trendlines, CH Offshore is still in the downtrend, and seems to be consolidating.

The 0.780 level (red dashed) looks to be a good support.

Good Luck !!

CH Offshore 271207

CH Offshore traded above the long term downtrend resistance (red) today. Volume was 598 today.



For tomorrow :

Support @ 0.790(lower green), 0.786(red)
Resistance @ 0.810(upper green)

Good Luck !!

CH Offshore 241207

CH Offshore still looks to be trading sideways.

CH Offshore 211207

CH Offshore should be trading sideways for awhile.



For Monday :

Support @ 0.780 then 0.775
Resistance @ 0.808

Good Luck !!

CH Offshore 191207

Although CH Offshore was trading higher compared to 18 dec, it is still within the downtrend channel (brown).



In order to reverse the down trend, CH Offshore would have to break 2 resistance - 0.815 and 0.825, and with volume. That is, provided it can open above 0.795 on 21 dec.

Support @ 0.750 (brown) and 0.730 (blue).

Good Luck !!

CH Offshore 141207

As mentioned previously, there was indeed action on 12 dec. It was a false break. As you can see from the chart, CH opened the next day below the previous day's closing, and it even broke down the support line (blue).

Looking at the downtrend channel (red - dotted), we could see CH testing 0.755 (22 nov low) next week.

For Monday :

Support @ 0.775

Resistance @ 0.835 (which coincides with downtrend resistance - red)

Good Luck !!

CH Offshore 081207

CH has been trading sideways since 3 dec. From trendlines a and b, you can see that CH is slowly being 'cornered'.

We should see some action within the next 2 days.



For tomorrow :

Resistance @ 0.865
Support @ 0.841

Thing to note : CH closed on day high @ 0.870 with volume of 148.

Good Luck !!