KGI Research Singapore has reiterated its “buy” call on the Thailand-based Mermaid Maritime, at a target price of 8.4 cents.
The move comes as the company goes “back to the good old days,” the analysts write in a Mar 7 note.
Mermaid Maritime provides drilling and sub-sea engineering services for the offshore & marine industry. Key clients under its subsea engineering segment are based in Southeast Asia and the Middle East.
KGI’s analysts say that the company stands to benefit from a surge in Brent oil prices to almost US$120 ($163.66) on Mar 6. The WTI similarly scaled to US$116 as the effects of the international sanctions thwarted global supply chains.
“Brent is now trading at levels when oil companies were partying like there’s no tomorrow,” the analysts note.
Despite the high oil prices, the Organization for Petroleum Exporting Countries+ (OPEC+) announced that it will raise output – as anticipated – by 40,000 barrels per days.
Only Saudi Arabia and the UAE have the spare capacity to supply even more barrels of oil, had the group wanted to further raise output levels.
Still, the announcement “will not have much impact on the current supply/demand dynamic,” says KGI’s analysts.
For now, oil and gas exploration and production companies have been among the first to rally in a commodity bull cycle, they add.
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For instance, players like Rex International and RH PetroGas have “surged by between 30% and 85% over the past month,” the analysts observe.
Meanwhile, downstream companies like Mermaid Maritime and Sembcorp Marine have just started to react to the higher oil prices.
“With oil prices back at where they were trading during the good old days, lagging oil companies should start to follow their upstream peers,” KGI’s analysts assert.
As at 9.31am on Mar 7, shares in Mermaid Maritime were up 0.5 cents or 6.10% to trade at 8.7 cents.
Cover image: Mermaid Maritime
