BIMB Research raised its financial year 2025 (FY25) to FY27 dividend per share assumption to two sen from 1.5 sen.
PETALING JAYA: With strong earnings visibility ahead, Velesto Energy Bhd
has indicated a firmer commitment to enhance shareholder returns through higher dividend distributions.
Following the completion of its major capital expenditure (capex) and special periodic survey cycle, Velesto is entering a low-capex phase with minimal borrowings, said BIMB Research.
This positions the company to potentially distribute more than 100% of earnings, supported by robust cash generation and a healthy balance sheet, it said.
BIMB Research raised its financial year 2025 (FY25) to FY27 dividend per share assumption to two sen from 1.5 sen, translating into an attractive dividend yield of 7.7% and a 106% to 132% dividend payout.
It implies a 14 times FY25 price-to-earnings ratio and 0.85 times FY25 price-to-book. It is justified given Velesto’s geographical diversification strategy will sustain utilisation rate at an optimal level and its daily charter rate remains elevated above US$100,000 per day, with a strong balance sheet with a net cash position.
The key catalysts to the stock price include order book replenishment from potential new long-term contract wins and higher dividend payout.
It made no changes to its earnings forecast and maintains its “buy” call with an unchanged target price of 27 sen a share.
At its target price, the stock offers a total potential return of 11.5%, including a dividend yield of 7.7%.
Velesto is actively tendering for multi-year contracts, particularly for both NAGA 2 and NAGA 6 rigs, whose contracts shall expire by the end of the fourth quarter of 2025 (4Q25) or 1Q26.
It estimates its tender book currently stands at RM4.3bil, comprising RM3.44bil in long-term drilling contracts, RM258mil in short-term drillingcontracts, and RM604mil in non-drilling tenders.
The group’s firm order book stood at RM1.1bil as at the end of 2Q25, with the secured rig utilisation rate projected at 72% for 2025, 35% for 2026 and 21% for 2027.
This could be further enhanced should Velesto successfully secure long-term replacements for the rigs with expiring contracts.
It said the industry fundamentals remain intact, supported by a stable oil price range of US$60 to US$70 per barrel, which continues to encourage upstream spending and drilling activities.
Although S&P Petrodata projects global jack-up rig marketed utilisation to ease to 81% in FY25 to FY27 (from 92% in FY24), the decline has proven more gradual than anticipated, with utilisation still firm at around 90% as of June 2025.
It believes this has pressured oil and gas operators to lock in rigs under longer-term charters of up to five years, as tightening supply conditions have reduced flexibility and increased competition for available capacity.
