Hyundai, Samsung May Jump 80% on Demand for Oil Drilling Ships, Mirae Says
South Korean shipbuilding stocks may
jump as much as 80 percent in four months as they catch up with
gains in oil prices, according to Mirae Asset Securities Co., an
affiliate of the nation’s second-largest money manager.
The Korea KRX Shipbuilding Index (KRXSHIP), which tracks Hyundai
Heavy Industries Co., Samsung Heavy Industries Co. and eight
other shipbuilding stocks, may rebound as rising oil prices spur
demand for drill ships and liquefied natural gas tankers, said
Lee Sokje, a Seoul-based Mirae analyst. The index has tumbled 42
percent since reaching the highest this year on May 2.
“Looking at how oil prices are doing, it’s only a matter
of time before shipyard shares follow,” Lee said by phone on
Dec. 2. “This is a very good opportunity to buy.”
Brent crude, the benchmark used to price two-thirds of
global oil supplies, has jumped about 9.8 percent since Oct. 4
because of easing economic concerns and political tensions in
Iran. The price may jump to $127.50 a barrel at the end of next
year as the global economy avoids recession, Goldman Sachs Group
Inc. said in a Dec. 1 report. It traded at $109.6 Dec. 2.
The Bloomberg World Shipbuilding Index (BWSHIP) has fallen about 32
percent this year as orders for vessels to carry containers,
commodities and oil have tumbled amid the European debt crisis
and a slump in freight rates caused by overcapacity.
Hyundai Heavy
This slowdown may affect Korean shipyards less than those
in China as shipbuilders including Hyundai Heavy, Samsung Heavy
and Daewoo Shipbuilding Marine Engineering Co. (042660), South Korea’s
three largest, have pared their reliance on these traditional
markets by focusing more on energy-related products. South
Korean yards may win more sales from energy products than ships
for the first time next year, according to NH Investment
Securities Co.
South Korean shipyards have built 88 percent of drill ships
ordered since 2000 and 77 percent of LNG tankers since 2006,
according to Mirae Asset’s Lee. Hyundai Heavy, based in Ulsan,
South Korea, has won a record 11 drill-ships orders this year.
The vessels are used to bore test wells.
Mirae’s Lee has ‘buy’ ratings on all six of the shipyards
he covers, according to data compiled by Bloomberg. He expects
Hyundai Heavy to rise to 540,000 won within 12 months. That’s
almost double the 289,000 won last closing price.
The shipyard (009540) is rated ‘buy’ by 37 analysts, with two
‘holds’ and two ‘sells,’ according to Bloomberg data.
To contact the reporter on this story:
Kyunghee Park in Singapore at
kpark3@bloomberg.net
To contact the editor responsible for this story:
Neil Denslow at
ndenslow@bloomberg.net
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