0043 GMT 14 October [Dow Jones] STOCK CALL: Daiwa maintains a Positive view on Korea’s shipbuilding sector before 3Q12 results. Daiwa expects Hyundai Heavy Industries (009540.SE) to report the strongest on-quarter earnings improvement, while Samsung Heavy Industries (010140.SE) is likely to record the highest operating-profit margin and lead the pack in terms of 4Q12 order intake. It tips Samsung Heavy as its top sector pick citing heightened order visibility for 4Q12, its belief that the company will continue to fare better in terms of earnings visibility and financials versus its peers, and the company’s undisputed market leader position globally in LNGCs and drillships, which are less vulnerable to the shipbuilding cycle than bulk carriers, tankers and containerships. The house tips Daewoo Shipbuilding and Marine Engineering (042660.SE) could post below-view earnings results due to weaker earnings from its overseas affiliates.
Key risks to its call include a prolonged economic downturn and a fall in oil prices below US$70/bbl. Daiwa has Outperform ratings on all three stocks.Samsung Heavy is last +0.7% at KRW34,000.
- John Phillips, © 2012 Dow Jones & Co