Hibiscus, Dialog to benefit from oil price spike, but gains may not last
In a sector research note, the firm identified Hibiscus as the most sensitive to oil price movements among the companies under its coverage.
"Hibiscus has the highest earnings sensitivity to crude oil price changes in our coverage universe and also one of the highest share price correlations to Brent," it said.
The firm said upstream players such as Hibiscus and Dialog Group Bhd stand to benefit from the recent surge in oil prices but cautioned that the rally may reverse if tensions ease and fundamentals take hold.
In contrast to Hibiscus, Dialog is expected to benefit more modestly due to its diversified earnings base.
"About 35 per cent of Dialog's Patami is linked to its upstream operations, while its tank terminal segment provides earnings stability," the firm said.
"Dialog's share price has historically been negatively correlated with Brent, as higher oil prices typically signal supply shortages that reduce tank utilisation.
"However, in the past week, the correlation has been positive due to strong utilisation from OPEC+ overproduction. The recent increase in oil prices is icing on the cake," it added.
CGS maintains Dialog as its top sector pick, citing its lower risk profile and long-term growth from expanding its tank terminal portfolio, particularly with two contracts in progress at Pengerang.
The firm reiterated its "overweight" rating on the energy sector, driven by strong fundamentals and attractive valuations of individual stocks.
A key rerating catalyst would be Iranian retaliation that disrupts regional oil production or closes the Strait of Hormuz, a vital route for global energy shipments.
"A de-escalation in tensions, combined with rising supply and weaker demand, could trigger a pullback in oil prices and sector earnings," it said.
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