OCBC Report - 03 Dec 2007

Oil & Gas Equipment and Services

Sector: Remains an OUTPERFORMSummary: While oil & gas stocks have outperformed in 2007, we are maintaining our OUTPERFORM rating on this sector for 2008. With the current investment climate, we view the upside potential as greater than the downside risks from lower energy price. We remain bullish on oil & gas stocks that focus their businesses on deepwater exploration services equipment such as Keppel Corporation [BUY; S$17.10] and Ezra Holdings [BUY; S$4.02]. We believe Rotary Engineering [BUY; S$1.60] is also in a good position to garner more contracts from the Middle East in the medium term. We are optimistic on oil & gas services-related stockists such as Aqua-Terra [BUY; S$0.70] and SSH Corporation [BUY; S$0.60] as we believe the true value of these stockists has not been fully priced in. With the recent market sell-down, this presents a good opportunity to re-enter the market, riding on the still strong demand growth in this sector. (Serene Lim)

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NEWS HEADLINES

• United Engineers Limited has been awarded a new Built-to-Suit project to build an ICT hub at the Changi Business Park, by the Jurong Town Corporation. Development cost is estimated at S$280m.
• STX Pan Ocean Co Ltd has secured a contract from the Middle East to construct four chemical tankers for S$384.7m, which brings its 2007 orders to US$9.63b.
• Equation Corp Limited has terminated its plans to build a solar film manufacturing plant in Singapore, due to its inability to raise enough funds amid the recent volatile market condition and sub-prime crisis.
• Asiatravel.com Holdings Ltd posted a 37.2% YoY gain in FY07 net profit to S$4.5m and a 23.3% increase in revenue to S$70.5m, due to robust demand for hotel rooms in its core Asian markets.
• Dayen Environmental Limited will raise about S$8.2m via a share placement of 22m new shares (S$0.38 each) to American Orient Capital Partners (Singapore), for its overseas expansion plans and working capital needs.
• Lian Beng Group Limited is placing out 35m new shares (S$0.68 each) to discharge a bank bridging loan and finance its property development business.