Yesterday saw WDS shares fall to their lowest level in almost seven weeks following the latest OPEC news with the stock looking soft after its 46% rally from its April low. WDS showed solid operational momentum in the 1H, with higher revenues and production and lower unit costs. However, declining commodity prices and project-related depreciation pulled profits down, leading to a lower interim dividend of 53c fully franked, and note its yield is forecast to fall moving forward. However, the correlation between WDS and oil and gas prices is strong and while OPEC remains prepared to increase supply, supported by the “drill baby drill” mantra from President Trump we believe buying into the sector should be very targeted and selective.
- We like the risk/reward towards WDS back around the $23.50 area, or 6% lower.
MM is neutral towards WDS around $25 short term
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