- POSTED: 18 Dec 2013 23:08
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The oil and gas sector has been growing steadily in the Singapore Exchange (SGX). To grow and expand, more of such companies have sought funding on the local capital market. But market experts warn of pitfalls when investing in such stocks.
SINGAPORE: The oil and gas sector has been growing steadily in the Singapore Exchange (SGX).
To grow and expand, more of such companies have sought funding on the local capital market.
But market experts warn of pitfalls when investing in such stocks.
The latest oil and gas debutante Linc Energy had a glowing first-day trading session on Wednesday.
It rose as much as 24 per cent over its IPO price of S$1.20 - hitting an intra-day high of S$1.49.
The stock, however, gave up some of the gains to end the day at S$1.435 - still 19.6 per cent higher from its offer price.
The oil, gas and coal producer is the third such counter to debut on the SGX this year.
The others include Mainboard-listed KrisEnergy and Catalist-listed Rex International.
In September, the SGX introduced new rules, allowing mineral, oil and gas companies that have yet to generate revenue, let alone profits, to list on the mainboard, provided their market capitalisation is over S$300 million.
In all, there are eight oil and gas exploration and production companies on the SGX.
Total market capitalisation of these companies has hit nearly S$3.97 billion.
With demand for oil and gas stocks likely to remain robust, market experts said investors should give more attention to the business models of such companies.
Aimed to make commercial discoveries, the oil and gas exploration and production sector is one of three core parts in the upstream oil and gas industry.
Oil field services and oil rig and ship building are the other pillars of the industry.
Daryl Liew, head of portfolio management at Reyl Singapore, said: “In the offshore marine sector, I am quite bullish in that regard, because you look at the age of the oil rigs out there in the market place, there is basically a need to revitalise and refresh that space.”
But some risks loom in the sector.
Major oil companies are expected to hold back on their capital expenditure next year due to rising costs and manpower labour.
This will likely cause a dent in the earnings potential for the oil and gas sector.