OCBC Report 20 Jun 14

KEY IDEA Strategy: Impact of Iraq conflict on companies Oil prices have been more volatile of late due to the conflict in Iraq, with WTI crude rising close to about US$107/bbl and Brent US$113/bbl last week to hit a nine-month high. It is everyone’s hope that the crisis will be contained soon, but should an escalation occur, we may see more interest in certain sectors whose earnings may be affected by high oil prices. In a sustained high oil price environment, the “winners” are upstream oil and gas players [Overweight], and coal miners, and the “losers” are refiners, utilities (those without cost pass-through mechanisms) and fuel-intensive industries such as transportation. We have an Underweight rating on the Air Transport sector, but are Overweight Land Transport. Companies with extensive operations in Iraq and neighbouring countries could also be at risk should the conflict spread. (Low Pei Han, Yap Kim Leng, Carey Wong, Andy Wong)

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NEWS HEADLINES - US stocks ended Thu’s choppy session modestly higher, as the S&P 500 eked out a gain, finishing at a record level for the 21st time this year. - Genting Singapore's plans to build a casino in South Korea have been stalled, Channel NewsAsia reported, citing a statement from the casino operator. - I Reit Global Management, backed by office buildings in Germany, is preparing an IPO in Singapore that may raise about US$300m, sources with knowledge of the matter said. - Darco Water Technologies announced late on Thu night that two former employees of its subsidiary have been sentenced to jail by Taiwan's Taipei District Court. - A unit of KS Energy's 80%-owned KS Drilling has sold the rights for the construction of a jack-up rig for US$84.88m. - Geo Energy Resources plans to buy a stake in a company with mining licences for two coal concessions in South Kalimantan, in a move which could boost its coal production dramatically. - Following a spike in global crude prices, Singapore oil product prices have risen by 3-5% on the back of a "fear premium" stemming from the latest flare-up in Iraq. - Vibrant Group announced that its subsidiary has acquired a 51% equity interest in Shentoncil, which in turn is looking to buy Cecil House.