Kenanga Research forecasts the company's FY26 earnings to grow further by 82% year-on-year.
PETALING JAYA: Kenanga Research expects newly-listed SumiSaujana Group Bhd’s earnings to improve by 61% year-on-year (y-o-y) in the financial year 2025 (FY25).
The research house said this would be underpinned by the recovery in demand for drilling mud products, particularly in Malaysia after some delays in late 2024.
“That aside, we have also pencilled in its capacity expansion (126% capacity jump) with an overall utilisation assumption of 55% and this could allow the group to gain more market share using its new capacity.
“Subsequently, we forecast its FY26 earnings to grow further by 82% y-o-y after pricing in an increase of its overall plant utilisation rate to 71%, and a 10% decline in average product selling price,” the brokerage added.
In 2025, it said drilling mud demand might be more tepid y-o-y due to lower expected drilling activity in Malaysia, as evidenced by the recently announced PETRONAS Activity Outlook (2025-2027) whereby 10 rigs are needed in 2025 by Petroliam Nasional Bhd (PETRONAS) as opposed to 14 in 2024.
This indicates lower demand locally from Malaysia but SumiSaujana’s revenue is quite diversified regionally, with its Malaysian revenue accounting for only 18% of its FY24 revenue.
Thailand and Indonesia, which account for 46% of its FY24 revenue are expected to see higher demand as both PTTEP (Thai National oil company) and Pertamina (Indonesia national oil company) are expected to increase their upstream capital expenditure (capex) y-o-y by 23% and 4% in 2025.
The company’s global market share for drilling fluids is 10%, representing a significant room for further gains in market share by the group in the longer run, particularly given the group’s capacity expansion and increased working capital firepower post-listing.
“Hence, we are not overly concerned about the take-up rate of the new capacity expansion by the group, as the group has already been operating at close to full utilisation before expansion.
“With capacity expansion, the group is expected to gain more market share both locally and globally, given its track record,” it noted.
Having said that, Kenanga Research said risks to its call include significantly lower Brent crude prices, long-term capex cut by PETRONAS, and material drop in drilling activities.
The group is primarily engaged in the manufacturing and trading of oil and gas specialty and industrial chemicals, supported by technical services.
