KUALA LUMPUR (March 11): Local upstream oil and gas players will likely benefit from the higher activities spurred by Petronas' capital spending of RM50 billion this year, from RM46.8 billion in 2018, according to Hong Leong Investment Bank (HLIB) Research.

In a note today, HLIB Research analyst Sean Lim said Sapura Energy Bhd is the research firm's top pick, with a target price of 41 sen on a "buy" call, while maintaining a "neutral" view on the sector. Sapura Energy shares were traded half a sen or 1.61% up at 31.5 sen at the time of writing, after 6.81 million shares crossed.

"Reading through Petronas' financial year 2018 (FY18) report card, commendable profit was delivered with balance sheet staying firm and healthy. We are pleasantly surprised by the capex spending target to land at RM50 billion this year (up 7% year-on-year). This would probably translate into higher activities in the upstream space.

"Meanwhile, the aggressive international expansion would probably benefit the services players which already have a strong international presence (i.e. Sapura Energy and Yinson Holdings Bhd) or companies that are eager to seek overseas growth (i.e. Malaysia Marine and Heavy Engineering Holdings Bhd [MMHE] and Dayang Enterprise Holdings Bhd)," Lim wrote in the note.

At 10am today, Dayang's share price, which has been on the uptrend of late, rose another nine sen or 5.7% to RM1.67. Meanwhile, Yinson was unchanged at RM4.45, and MMHE shares slipped half a sen or 0.65% to 76 sen in thin trade.

HLIB Research kept average oil prices forecast unchanged at US$68 per barrel for the year. At the time of writing, the Brent crude oil is up 0.15% at US$65.84 a barrel.