Brief Singapore: Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works. and more

In this briefing:

1. Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.
2. CSE Global: Gaining Momentum
3. Another US LNG Project Goes Ahead: Positive for the Contractors; Negative for Others Looking to FID

1. Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.

According to SEMI, North American (NA) WFE sales for January 2019 fell to $1.9 billion, down ~10% sequentially and ~20% YoY. This was an abrupt reversal of the recovery trend implied by the December 2018 sales of $2.1 billion and is the biggest monthly sales YoY decline since June 2013.

Just as declining monthly WFE sales preceded the current semiconductor downturn by some six months, the continuation of December’s MoM WFE decline reversal trend was a prerequisite for a second half recovery in the broader semiconductor sector. With that trend well and truly broken,  we now anticipate a more delayed, gradual and prolonged recovery, one which is now unlikely to materialise until late third, early fourth quarter 2019. 

2. CSE Global: Gaining Momentum

• Investors who have bought CSE Global on dips since my last note would have profited ~18%.
• The upbeat guidance by management and supply-demand environment should give some legs to the recent rebound.
• While risks of slower global growth may weigh on the stock, the stock is trading below its five-year average PE despite significantly improved cash flow from operations and a healthy order intake (three-year high). 

3. Another US LNG Project Goes Ahead: Positive for the Contractors; Negative for Others Looking to FID

US private LNG company Venture Global is starting construction on its 10 million ton per annum (mtpa) US LNG export facility in Louisiana after gaining approval from the US Federal Energy Regulatory Commission (FERC). This is positive for the LNG contractor market and we discuss the companies involved in the project. 

This follows final investment decision taken on Golden Pass (Exxon and Qatar Proceed with US$10bn Golden Pass LNG Terminal: Positive for Chiyoda and MDR US) and supports our thesis of a large wave of new projects that will be sanctioned in the coming months (A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies). This was viewed as a relatively speculative project and with aggressively low cost and timing estimates.