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Top Calls
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Company Update � UMW -OG (REDUCE, maintain)
- Scarcity premium buffers valuation risk We admire the management team for carrying out a commendable job since listing in November 2013. However, we opine that these (expansion plan, contract wins) are broadly within market expectations and largely priced-in. At 24.3x CY15 PER, UMW-OG is valued at 167% premium to global rigs operator (9.1x CY15 PER) and 23% premium to domestic O&G big caps average CY15 PER of 19.5x. Nonetheless, we opine that strong market appetite for Shariah compliant oil & gas big caps will buffer the valuation risk. In view of the investors� increasing appetite for, and limited supply of Shariah compliant O&G big caps, we had in our recent Malaysia Strategy Note � Seeking returns in a lofty market (2 July 2014) raised our target PER for UMW-OG to 21x (from 18x) and upgraded the stock to REDUCE (from SELL). We value UMW-OG at RM3.65 based on 21x CY15 EPS.
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Other Calls
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Economy � US Outlook � Weekly Wrap (30 June � 4 July 2014)
- US unemployment rate improved to 6.1% in June
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