Velesto profits set to rise on high charter rates

CGS-CIMB Research expects Velesto’s profits to rise dramatically from financial year 2023.

PETALING JAYA: The global rise in utilisation and charter rates for jack-up (JU) fleet this year spells good news for Velesto Energy Bhd.

The global JU utilisation rates are anticipated to rise to about 80% in 2023, from just 69% in 2021, on the back of strong drilling activities in the Middle East and China, according to CGS-CIMB Research.

As such, it said the global average JU daily charter rate (DCR) of just US$67,000 (RM284,750) per day in the 2020 trough has risen to as high as US$100,000 to US$130,000 (RM425,000 to RM552,500) per day for contracts signed in late 2022 and early 2023.

It noted that the aggregate supply of new JUs is likely to be very modest, and an expected equivalent of only 12 new JUs to be delivered in 2023, representing a fleet growth of just 5.5% year-on-year (y-o-y) in 2023, against global demand growth of 11% y-o-y.

Based on these strong fundamentals, among others, the research house expects Velesto’s profits to rise dramatically from financial year 2023 (FY23).

“From FY24 onwards, Velesto will no longer be bound by Petroliam Nasional Bhd’s (PETRONAS) umbrella contract.

“We have penciled in US$110,000 (RM467,500) per day DCR for FY24-FY25 forecast, US$100,000 (RM425,000) per day for FY26-FY28, moderating to US$80,000 (RM340,000) per day from FY29 onwards,” it said.

Consequently, it expects Velesto’s core earnings to rise from a RM15mil net loss in FY22 to RM190mil net profit in FY23, to between RM273mil and RM327mil for five years between FY24 and FY28, before moderating to between RM123mil and RM132mil in FY29-FY32.

“Every US$10,000 (RM42,500) per day increase in our new-contract DCR assumptions will increase Velesto’s FY23 forecast core net profit by 17% and our discounted cash flow (DCF)-based target price by 20%,” it said.

Velesto is a provider of drilling and oilfield services for the upstream sector of the oil and gas industry.

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Velesto , earnings , charter , jack-up , fleet , utilisation , rates , PETRONAS


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