Excerpts from analyst's report

Credit Suisse analyst: Gerald Wong, CFA


299_renyuanlinRen Yuanlin, executive chairman of Yangzijiang Shipbuilding. NextInsight file photoWith OPEC not cutting supply, the Credit Suisse Global Energy team has further lowered its 2015 Brent forecast to US$75.25 and 1Q15 forecast to US$68, the lowest quarter average since 2009. Lower oil prices could lead to downside risks to E&P capex and slower near term ordering activity. With few positive sector drivers, we maintain our UNDERWEIGHT stance on the sector. 


We are cautious on stocks trading significantly above 08/09 trough, including Sembcorp Marine and Ezion. Our preference is for Yangzijiang due to limited oil and gas exposure.



creditsuisse_offshore12.14Yangzijiang our preferred pick; Ezion and Cosco least preferred
With few positive sector drivers, we maintain our UNDERWEIGHT stance on the sector. We are cautious on stocks trading significantly above book value, including Sembcorp Marine (NEUTRAL) and Ezion (UNDERPERFORM).
 
Our preference is for Yangzijiang due to limited oil and gas exposure. We expect Yangzijiang to benefit from ongoing consolidation in the Chinese shipbuilding sector and win a disproportionate share of new orders.

At the same time, the key overhang for the stock in the past few years has been its investments in financial assets in China, but we expect that to be gradually reduced with the company’s plans to exit from non-core businesses. Valuation is attractive with a P/B of about 1.1x, close to its historical trough. 

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