Introduction

The Malaysian oil and gas industry is undergoing significant transformations, with companies adapting to emerging challenges and opportunities. UOB Kay Hian Securities has provided a detailed analysis of the sector, highlighting key developments, risks, and recommendations for leading players. This report focuses on the performance, prospects, and investment potential of companies like Bumi Armada, Dialog Group, Yinson Holdings, and more.

Bumi Armada (BAB MK)

Recommendation: HOLD

Target Price: RM0.65

Market Capitalization: RM3.91 billion

Bumi Armada is currently navigating a challenging operating environment, with its valuation reflecting a cautious outlook. The company trades at an attractive Price-to-Earnings (PE) ratio of 4.9x for FY2024F and 3.8x for FY2025F. Its Price-to-Book (P/B) ratio remains low at 0.5x for both years, indicating a discounted valuation.

Despite its low valuation metrics, Bumi Armada faces significant risks, with net debt-to-equity ratios of 62.8% for FY2024F and 36.0% for FY2025F. However, the company’s Return on Equity (ROE) is projected to improve from 11.3% in FY2024F to 13.1% in FY2025F. Investors are advised to hold their positions as the risk-reward ratio appears balanced, and the company’s fundamentals are expected to stabilize over time.

Dialog Group (DLG MK)

Recommendation: BUY

Target Price: RM3.00

Market Capitalization: RM10.67 billion

Dialog Group is a standout performer in the sector, with a strong focus on business diversification and energy security. The company is well-positioned to benefit from crude storage demand and the Johor/Pengerang development theme. It is poised for earnings reversion, supported by its robust fundamentals.

Dialog Group’s PE ratios stand at 20.4x for FY2024F and 18.7x for FY2025F, reflecting investor confidence in its growth trajectory. Its P/B ratio is 2.0x for FY2024F and 1.9x for FY2025F, while its interest coverage ratio remains healthy at 10.0x and 10.5x for the respective years. Dialog Group’s ROE is projected to improve from 10.2% in FY2024F to 10.4% in FY2025F, making it a compelling buy for investors.

Deleum (DLUM MK)

Recommendation: BUY

Target Price: RM1.70

Market Capitalization: RM550 million

Deleum is another promising pick in the oil and gas space, primarily due to its expertise in gas turbine maintenance. The company’s PE ratios are attractive at 8.7x for FY2024F and 8.2x for FY2025F. Its P/B ratio remains stable at 0.9x for both years, highlighting its solid asset base.

Deleum’s interest coverage ratio is exceptionally high, standing at 137.2x for FY2024F and 90.1x for FY2025F. This financial strength, coupled with a consistent ROE of over 11%, positions Deleum as a reliable investment option for those looking to capitalize on the maintenance segment of the oil and gas industry.

MISC (MISC MK)

Recommendation: BUY

Target Price: RM9.55

Market Capitalization: RM32.14 billion

MISC is a heavyweight in the sector, benefiting from its diverse operations and strong financial metrics. The company’s PE ratios are 13.9x for FY2024F and 13.6x for FY2025F, reflecting its consistent earnings performance. Its P/B ratio of 0.8x for both years underscores its undervaluation relative to peers.

With an interest coverage ratio of 7.4x for FY2024F and 6.6x for FY2025F, MISC is well-equipped to manage its financial obligations. Its ROE is steady at 6.0% for both years, making it a stable investment choice for risk-averse investors.

Petronas Dagangan (PETD MK)

Recommendation: HOLD

Target Price: RM24.70

Market Capitalization: RM19.11 billion

Petronas Dagangan is a well-established player in the downstream segment, with a focus on fuel retail and distribution. The company’s PE ratios are 20.3x for FY2024F and 19.3x for FY2025F, reflecting a premium valuation. Its P/B ratio stands at 3.7x for FY2024F and 3.6x for FY2025F.

The company’s interest coverage ratio is robust at 135.0x for FY2024F and 95.3x for FY2025F, indicating strong financial health. Its ROE is projected to improve from 18.3% in FY2024F to 18.8% in FY2025F. Investors are advised to hold their positions as the company continues to deliver steady returns.

Uzma (UZMA MK)

Recommendation: BUY

Target Price: RM1.08

Market Capitalization: RM322 million

Uzma stands out for its focus on niche services within the oil and gas sector. The company’s PE ratios are 7.3x for FY2024F and 6.2x for FY2025F, indicating strong growth potential. Its P/B ratio is 0.6x for FY2024F and 0.5x for FY2025F, reflecting a discounted valuation.

Uzma’s interest coverage ratio is stable at 4.6x for both years, while its net debt-to-equity ratio improves significantly from 47.0% in FY2024F to 69.5% in FY2025F. Its ROE is expected to increase from 7.5% in FY2024F to 8.5% in FY2025F, making it an attractive investment opportunity.

Yinson Holdings (YNS MK)

Recommendation: BUY

Target Price: RM3.75

Market Capitalization: RM7.30 billion

Yinson Holdings is the top pick in the sector, thanks to its leadership in the global value chain and minimal reliance on Petronas. The company’s PE ratios are 13.6x for FY2024F and 10.7x for FY2025F, highlighting its strong growth prospects. Its P/B ratio is 2.0x for FY2024F and 1.8x for FY2025F.

Yinson’s interest coverage ratio is impressive at 149.8x for FY2024F and 165.8x for FY2025F, underlining its financial strength. Its ROE is projected to improve from 10.4% in FY2024F to 12.8% in FY2025F, making it a must-buy for investors looking for high-quality growth stocks.