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Author: SGX   |   Latest post: Mon, 20 Jun 2022, 8:22 AM

 

SG Maritime and Offshore Plays Pivoting to Clean Energy and Rewewables

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  • Crude oil prices gained c. 61% since Dec ‘21 to multi-year highs (>US$100/bbl) on the back of geopolitical tensions and stronger economy recovery from COVID-induced slowdown. Maritime and Offshore Services (MOE) companies have experienced improving near-term industry outlook on the back of the oil rally and also increased shipping demand.
     
  • While SGX MOE companies are benefitting from near-term tailwinds, many of them are also pivoting to clean and renewable energy related businesses, as part of their longer-term strategies. Opportunities seen in LNG and offshore renewables such as windfarms.
     
  • The top 10 most actively traded MOE companies posted YTD average total returns of +20.6% (vs. the STI’s +7.9%), building on the average of +53.5% seen in 2021.

 

Since December 2021, WTI crude oil has saw a gain of nearly 61% to multi-year highs on the back of geopolitical tension in Eastern Europe impacting supply and stronger economy recovery from a COVID-induced slowdown. While the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) have both revised down global crude oil demand projects, prices have remained above US$100/bbl in recent trading sessions.

Singapore is an International Maritime Centre a global offshore and marine hub and is expected to grow in tandem with increasing global demand for clean and renewable fuel (e.g. diversification into liquefied natural gas (LNG) and offshore renewables).

SGX is also one of the largest clusters of Maritime and Offshore Services (MOE) companies in Asia Pacific. The sector is diverse with sub-segments ranging from business trusts, energy, offshore services, shipping and shipyards.

oil price returned 61% since December 2021

Source: Bloomberg. As of 21 April 2022. Oil prices from WTI crude oil contract

Top 10 Active MOE Stocks Outperforming Broader Index

Source: Bloomberg, Refinitiv. As of 21 April 2022
 

The 10 most actively stocks in the MOE sector outperformed the broader FTSE Straits Times Index (+7.9%) with an average total returns of +20.6% in the YTD, building on the +53.5% returns seen in 2021. Rising crude oil prices and buoyant freight rates continue to be near-term drivers for the sector.

Pivoting into green energy

While the sector continues to be governed by crude oil price movements in the near-term, companies have been pivoting into renewables as global demand for clean energy grows rapidly. A common theme in this space is the shift to greener solutions such as green vessels, offshore windfarms and solar.

Below are some examples (not-exhaustive) of the pivots some companies have done:

Yangzijiang Shipbuilding Committed to develop strategic growth in LNG-related capabilities and shift towards net-zero emissions and shipping carbonisation. The company currently has R&D centres in China focusing on green vessel technology and will be setting up an advanced maritime R&D centre in Singapore to focus on areas such as green vessel technologies as well as autonomous vessels, cyber- physical simulations, digital twinning and advanced low latency communication systems.

Keppel Corp – In line with the company’s Vision 2030, which puts sustainability at the core of the Group’s strategy, business units have seized opportunities in renewable energy such as solar and offshore wind. For example, Keppel hopes to grow renewables portfolio to 7 gigawatts by 2030, with hopes to achieve it by 2025 (source Business Times). The group is also part of a consortium which is acquiring a majority stake in a solar platform (Cleantech Renewable Assets) to accelerate its growth in this space.

Sembcorp Marine – The company aims to grow sustainable solutions (covering gas, renewables and cleaner energy) to 40% of its overall revenue by 2030 (currently 30% as of FY2021). Sembcorp Marine recently, via its subsidiary, secured a contract to construct a Wind Turbine Installation Vessel (WTIV) based on its in-house design in collaboration with the customer.

Kim Heng – Pivoted away from oil and gas sector since 2014 and focuses now on offshore windfarm renewables. Company is leveraging on its capabilities, experience and track record in the oil and gas sector to reapply them to renewable energy and marine construction. The company intends to look for opportunities in offshore windfarm renewables segment and expects more contract wins in renewable energy. Read more in the 10 August 2021 edition of SGX Research 10 in 10 report.

Marco Polo Marine – The company has been diversifying its customer base beyond the oil & gas sector, with some of its vessels now supporting construction of offshore windfarm projects in Taiwan. Close to 20% of its currently utilized vessels are working on offshore windfarm projects, with contribution to its financial performance. Aside from this, Marco Polo intends to support the operation and maintenance of offshore windfarms after they are built. Read more in the 13 July 2021 edition of SGX Research 10 in 10 report.

10 most actively stocks in the MOE sector

Code

Mkt Cap S$M

12M Daily Traded Value

(S$M)

2022 YTD

total returns %

2021

total returns %

1Y

total returns %

Yangzijiang Shipbuilding

BS6

6,084

35.4

14.9

44.6

15.8

Keppel Corp

BN4

11,973

19.7

29.9

-1.5

29.6

Sembcorp Marine

S51

3,861

11.8

50.0

-34.1

-31.1

Hutchison Port Holdings*

NS8U

2,853

2.6

11.0

22.8

10.3

Samudera Shipping Line

S56

550

1.1

78.9

138.4

238.5

Kim Heng

5G2

64

0.6

15.4

143.8

136.8

Marco Polo Marine

5LY

106

0.4

11.1

107.7

50.0

Civmec

P9D

327

0.3

-0.7

69.6

22.9

Mermaid Maritime

DU4

106

0.2

0.0

11.9

10.3

Ausgroup

5GJ

68

0.2

-4.3

9.5

-24.1

Average

 

 

 

20.6

53.5

45.9

Source: SGX, Refinitiv, Bloomberg (Data as of 21 April 2022)

*HPHT returns in USD

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Related Stocks

Chart Stock Name Last Change Volume 
Keppel Corp 6.56 +0.04 (0.61%) 1,566,300 
Sembcorp Marine 0.108 +0.003 (2.86%) 57,817,700 
KimHeng Offshore 0.09 +0.003 (3.45%) 6,259,100 
YZJ Shipbldg SGD 0.95 -0.005 (0.52%) 9,512,500 
MarcoPolo Marine 0.029 0.00 (0.00%) 1,504,800 

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