PETALING JAYA: Despite an earnings-estimate upgrade by Maybank Investment Bank (Maybank IB) Research, Velesto Energy Bhd
saw its target earnings multiple reduced over concerns about new jack-up rigs entering South-East Asia.
Citing Upstream, an online news portal which focuses on the international energy industry, Maybank IB Research said Saudi Aramco has suspended about 20 jack-up rig contracts for about 12 months, following the country’s decision to pause further expansion of its oil production capacity beyond 12 million barrels per day (bpd).
“Concerns are lingering on the possibility of some of these new rigs entering the South-East Asia, which may put downward pressure on future daily charters rates (DCRs) beyond 2026 and 2027,” it said.
Due to these concerns, Maybank IB Research reduced its target price-to-earnings ratio on Velesto to 13 times from 14 times and its target price on the stock by one sen to 34 sen a share.
However, the research house noted that Velesto is protected by its high utilisation rate at least until the end of 2025.
Maybank IB Research increased its utilisation rate assumption for the year to align with Velesto’s guidance on its rig schedule during its recent analyst briefing, resulting in a 5% increase in forecast earnings for its financial year 2025 (FY25).
However, the earnings forecast for FY24 and FY26 were unchanged.
The research house updated the utilisation rates to 83%, 88%, and 83% for FY24, FY25 and FY26, respectively.
Additionally, blended average DCRs were adjusted to US$112,000, US$130,000, and US$132,000, respectively.
Maybank IB Research expects Velesto to report strong first quarter (1Q24) results, in line with the group’s current high utilisation rate.
“We expect its 1Q24 utilisation rate to be flat quarter-on-quarter at 94%, with all jack-up rigs utilised, and an average blended DCR of US$98,000,” it said.
All in, the research house expects Velesto to report a core net profit of between RM45mil and RM50mil, versus the RM57.7mil recorded in 4Q23, barring any unforeseen cost swings.
