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Saturday, February 2, 2013

CIMB tips buy opportunity in Ezra, Swiber


While Singapore's offshore oil-servicer plays may see near-term weakness after Saipem's (SPM.MI) profit warning, it's too pessimistic to assume similar fates, CIMB says.

It notes Saipem's warning was due to lower margin contracts in the Mideast, Nigeria and Algeria, with award delays in Venezuela, Nigeria and Iraq.
"We believe the profit warning is company-specific and an act to 'clean up' as Saipem was recently queried by the Italian public prosecutor for alleged corruption in Algerian contracts," CIMB says; although Saipem has denied the allegations.

Singapore offshore-service players Ezra (5DN.SG) and Swiber (AK3.SG) have limited exposure to onshore E&C, while Ezra's subsea SURF installation's focus is different from Saipem's, it notes. "Ezra's main projects are also in less-risky regions such as the North Sea and Gulf of Thailand. The small scale of its projects of US$50-$80 million ($62-99 million) also limits aggressive price slashing by Ezra, we believe. Swiber's projects are largely in India and South-East Asia."

It views Ezra and Swiber as still cheap vs their five-year P/E and P/BV means. "Industry domino effects from Saipem could create near-term pressure on their stocks, but we see opportunities for accumulation." Swiber is down 1.4% at $0.705; Ezra is down 0.4% at $1.195.

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