Oil & gas sector draws a strong start with 5.9% index appreciation

Guess the sector’s best-performing firm.

According to OCBC Investment Research, the sector saw good investor interest in early 2013 - the FTSE Oil and Gas index has appreciated by 5.9% vs the STI’s 4.6% gain over the same period. Stocks in this sector, which generally have higher betas, saw a strong start to the year with renewed optimism in the broader market, it said.

Under its sector coverage comprising 15 O&G stocks, Ezion has delivered the best performance since then with a 26% price appreciation.

Here’s more from OCBC:

In the report, we highlighted Keppel Corporation, Sembcorp Marine, Ezion Holdings and Nam Cheong Ltd as our preferred picks for the sector. Nam Cheong also turned in a notable 13% gain, along with renewed interest in the small-mid caps.

Keppel Corp saw a 8% rise, while Sembcorp Marine saw a 5% gain. The sector is still pretty much driven by macroeconomic events in the near term.

Though Brent and WTI crude prices are expected to remain supportive of offshore capex, Mar has become the new Dec, and cautiousness may start to emerge in Feb as political brinkmanship in the US intensifies before the Mar fiscal cliff deadline. We are also expecting in-line results for most of our companies in the sector when they report in Feb.

We note that the early part of last year also saw relatively good performance in the O&G sector, and this is likely to be seen in early 2013 as we believe that upcoming data supports a thesis for improving conditions for equities.

For the longer term, we maintain our OVERWEIGHT rating on the sector and reiterate our picks: Keppel Corporation[BUY, FV: S$12.49], Sembcorp Marine[BUY, FV: S$5.84], Ezion Holdings [BUY, FV: S$2.05], Nam Cheong Ltd [BUY, FV: S$0.30].