[LEFT]0658 GMT 21 June [Dow Jones] Keppel (BN4.SG) is down 1.8% at S$10.03 and SembMarine (S51.SG) is down 2.4% at S$4.53, in line with regional oil-related stocks’ sharp drops. UOB KayHian notes the two are correlated to oil prices, tending to climb steeply in a rising oil-price scenario, buoyed by rising contract wins and expanding P/Es and P/Bs in analysts’ valuations. But share-price deflation can be equally steep when oil falls below US$80/bbl, an important benchmark in oil companies’ E&P spending budgets, it says, noting WTI is currently around US$81/bbl. Based on current oil prices, it believes Keppel and SembMarine should trade at one-year forward P/B of 2.2X and 3.5X respectively. While Keppel’s current 2.3X P/B is near this estimate, SembMarine’s 4.0X is well above, it notes.“If oil price were to fall to say US$60/bbl, we reckon their P/B valuations - and hence share prices - could be shaved off by another 20%-30%.” It keeps Keppel’s target at S$13.00 and SembMarine’s at S$5.80, rating both Buy as consensus 2012 oil-price forecast remains US$92/bbl.
- Leslie Shaffer, Dow Jones Newswires[/LEFT]