According to BIMB Securities Research, the company's recent multiple contract wins signify the recovery in offshore activites, which suggest the worst is over.
Velesto yesterday announced that its NAGA 4 secured a new contract with Sarawak/Sabah Shell to drill seven firm well with a contract value of US$17.68mil.
The contract is expected to begin in September 2021.
NAGA 4 is currently assigned to Mubadala Petroleum for the seven firm wells drilling campaign at Pegaga field until June 20201.
BIMB said the contract win is largely within its expectation but expects more contract wins in ahead.
"To recap, we expect Velesto to achieve utilisation rate of 70% for FY21.
"We expect more contract award in near future as the company is tendering for 24 contracts (16 short term and 8 long term) with total bid value of RM2.9bil," it said.
Currently, two rigs are still idle without contract, while NAGA 5 and NAGA 7 will end their short term contracts in June and September 2021 respectively.
The research house reiterated its "buy" call with an unchanged target price of 26.5 sen based on 1x FY21 forecast price-book.