OSV Sector Remains Bullish Due To Ongoing Supply Tightness -- Kenanga
KUALA LUMPUR, Dec 6 (Bernama) -- The Malaysian offshore supply vessel (OSV) sector, particularly the accommodation work barges (AWB) segment, is expected to remain bullish due to persistent vessel supply tightness from years of underinvestment, according to Kenanga Investment Bank Bhd.
In a research note, it said the local OSV market benefits from a captive structure due to the cabotage policy limiting foreign vessels, while Malaysia’s regulations on fleet age now allow vessels up to 20 years old for tenders, compared to the previous 15-year cap, further contributing to supply constraints.
“With an average fleet age of 14 years, the sector is nearing a critical point for fleet renewal to sustain long-term operational efficiency.
“These dynamics, coupled with strong demand, position the OSV sector for continued growth and robust charter rates,” it said.
Kenanga said if demand is sustained in the coming years, there might be a pick-up in demand for OSV new builds.
Meanwhile, the investment bank reported that the results for the oil and gas (O&G) sector in the third quarter (3Q) of 2024 were mixed, with 30 per cent of companies exceeding expectations and an equal proportion underperforming, compared to 2Q 2024, where 50 per cent exceeded expectations and only 11 per cent fell short.
It said weak macro developments weighed on mid-downstream players, while upstream services counters outperformed on stronger-than-expected profit margins, underscoring the upstream sector’s resilience amid global macro uncertainties.
“As 2025 approaches, we recommend a more selective approach within the upstream services space, focusing on maintenance-driven sectors,” it said.
Kenanga maintained its “overweight” call on the O&G sector, with the same emphasis placed on upstream service providers and midstream players due to a favourable macro-outlook.
The investment bank said it remains optimistic about maintenance-focused players, such as those in upstream maintenance and AWB, given the resilient demand in these areas.
“Additionally, regional demand is expected to bolster activity for upstream services providers amid tight supply conditions,” it added.
-- BERNAMA