In addition to the tax incentives (detailed in our budget report) announced in the budget, Petronas reiterated its commitment on capex spending at the 2014 Offshore Technology Conference Asia PSC spending alone will be RM183bn, over the next 5 years.   

In addition to the PSC spending, investment in the Refining and petrochemical integrated development (Rapid) will be RM60bn.  In addition to the four partners currently in RAPID, Petronas is now selecting the partners and licences for activities within the complex.

We reiterate our overweight call and maintaining the view that focused spending to resuscitate and/or expedite O&G production will benefit selected O&G players as CAPEX spending and RSC disbursement intensifies in 2H2012 and 2013.

Top picks in order of preference whereby all would benefit from the above;  

SapuraKencana (TP: RM2.77 BUY, 20x FY01/14 EPS of 13.4 sen/share),

Dayang (TP: 2.65 BUY, 14x FY13 EPS of 19 sen/share),

Perisai  (TP: RM1.60 BUY, 16x FY13 EPS of 10 sen/share),

Uzma  (TP: RM2.10 BUY, 10x FY13 EPS of 21 sen/share),

Wah Seong (TP: RM2.10 13x  FY13 EPS of  16 sen/share).

Source: Hong Leong Investment Bank Research - 1 Oct 2012