KUALA LUMPUR: MIDF Equities Research is still positive on the outlook of Deleum Bhd
, buoyed by a strong orderbook of RM2.9bil representing a burn-rate of around four years.
It said on Wednesday the earnings visibility remains intact as it anticipate lumpy orders to be placed by year end and flow into FY17.
“In addition, the announcement for the maintenance, construction and modification (MCM) works for the Malaysian production sharing contractors involving topside maintenance, hook-up and commissioning and facilities improvement works could be announced by year end,” said MIDF Research in its report.
The research house estimates Deleum’s portion to be approximately RM500mil and this will be booked under its Integrated Corrosion Solutions division.
MIDF Research reiterated its “buy” recommendation with a reduced target price of RM1.25 per share. Its target price is based on 2017 forecast earnings per share of 12.5 sen, pegged to 2017’s price-to-earnings ratio of 10 times.
“Deleum's 2H16 earnings are expected to be tail-heavy. Margin compression in oilfield services expected due to heavy competition and costs reductions from clients,” it said.
It said despite global crude oil prices trending higher, hovering steadily at above USD50pb, offshore services remain tough from further opex cut by oil majors, including Petronas.
“Therefore we are expecting Deleum’s 3Q16 earnings to match or at best, exceed that of 2Q16 marginally.
“However, there might be a jump in the company’s 4Q16 earnings as lumpy orders are placed for the power and machinery segment. Nonetheless, overall FY16 earnings will most likely be unable to keep pace with our previous earnings expectation,” it said.
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