Affin Hwang expects earnings growth of 19% for Velesto for the financial year 2024.
PETALING JAYA: Velesto Energy Bhd
looks poised to post strong earnings in 2024, backed by healthy rig utilisation. Additionally, the uptick in daily charter rates (DCR) will be positive on its bottomline, says Affin Hwang Investment Bank Research.
The research firm noted that currently, all of Velesto’s six rigs had secured jobs throughout 2024, with only two still under bidding for 2025.
Based on a rig utilisation assumption of 85% and DCR assumption of US$105,000, it expected earnings growth of 19% for the financial year 2024 (FY24) and growth of close to one-quarter the following year assuming DCR rises to US$115,000.
In 2023, Velesto’s rig utilisation rate was 83%, while DCR stood at US$94,000.
“For the upcoming 1Q24 results, we anticipate earnings to come in comfortably higher year-on-year, but results may see a slight quarter-on-quarter dip, as last quarter was also helped by the reversal of provisions from Naga 7, as well as the unusually high operation efficiency of 99%,” said Affin Hwang in a report.
According to the research firm, the global jack-up rig market is currently facing a boom.
Locally, national oil company Petroliam Nasional Bhd (PETRONAS) is also increasing its rig demand throughout 2024-2026.
“In its latest activity outlook, PETRONAS is guiding that its jack-up rig demand will continue to stay elevated in the coming years – growing to 13-15 rigs in 2024-2026, from an actual of 12 in 2023.
“This virtually confirms that all of Velesto’s rigs should be fully contracted out over the next few years.
“This is given that Velesto is the sole Malaysian-based jack-up rig provider with a fleet of six rigs, with PETRONAS also needing to charter foreign rigs to cater to its own demand,” it added.
It noted that in South-East Asia, including Malaysia, all working and available rigs had already been contracted out and dayrates were as high as US$165,000.
For context, Velesto’s dayrates were at US$99,000 in 4Q23.
“We are reiterating our ‘buy’ call on Velesto, with an unchanged 12-month target price of 33 sen.
“Among local-centric oil and gas services and equipment providers, Velesto stands out as one of our favourites, given its high visibility and certainty in its earnings recovery,” said Affin Hwang.
