OIR BITES: High oil prices on Iran's recent move

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.27

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.97

OIR BITES: High oil prices on Iran's recent move 17 Feb 2012

- Crude prices continue to rise - Higher oil prices could result in increased Oil & Gas capex - Maintain Overweight on the sector After some slight easing in Jan, oil prices have been on the uptrend in Feb, with the price of Brent crude rising by about 10% since 1 Feb to S$121/bbl currently and the price of WTI increasing by 4.8% over the same period to S$102/bbl. Iran's latest move to stop some exports to Europe has also lent support to oil prices. This is apparently a retaliatory move in response to the EU's embargo around Jul this year, meaning that European refineries have to find new sources of oil earlier than expected. Higher oil prices could result in increased capital expenditure in the oil and gas industry, benefiting oil and gas stocks. On the other hand, a period of sustained elevated prices is likely to be a drag on a nascent global economic recovery. It would also be hard to tame inflationary pressures in emerging markets, as oil directly and indirectly affects all sectors in the economy. Meanwhile, we expect more new order flows for offshore and marine companies, and maintain our Overweight rating on the sector: We switched our preference from Keppel Corp to Sembcorp Marine (between the two) in early Jan and the latter has risen 38% YTD vs the former's 16% rise. SMM is announcing its results next week, and we will look to review our rating. As for Ezion Holdings, our small-mid cap pick, the stock has appreciated 42% YTD and we will also look to revisit our rating during its results announcement next week. Keppel Corporation: [BUY, FV: S$12.27, Current: S$10.79] Sembcorp Marine: [BUY, FV: S$5.63, Current: S$5.29] (results out Thu next week, will look to review post results) Ezion Holdings: [BUY, FV: S$0.97, Current: S$0.935] (results out Wed next week, will look to review post results) Technical Outlook on Crude (WTI) Currently, WTI crude is trading around US$102.36/bbl, just a tad below the key US$103.06 resistance (61.8% retracement of the plunge from US$146.73 to US$32.40). And it looks like the price could soon rise above this key resistance soon, given that the daily technical indicators have turned a lot more positive. The daily RSI continues to trend higher and is not yet showing any overbought signals. The daily MACD has not only made a positive crossover recently, but it has also just risen above the centre line. As such, a break above US$103.06 could see the price inching up further to US$114.83 (May '11 highs); and we believe it should continue to hold well above US$99.72 (30-day moving average). Exhibit 1: Orange line- Brent, White line - WTI; Green line shows Brent premium over WTI Source: Bloomberg

Warm regards,

Company Registration No: 198301152E