UOBKH Research maintained its earnings forecasts for Velesto.
PETALING JAYA: Velesto Energy Bhd
’s outlook is anticipated to be supported by a recovery in global demand for jack-up rigs this year, as well as a definitive timeline for the disposal of the Naga 3 rig.
The latter may generate a special dividend of three sen, said UOB Kay Hian Research (UOBKH Research).
Although the research house said it believes the rig disposal may have been the key catalyst driving up the share price lately, it did not factor the special dividend in its valuation, as Velesto has time until December to consider whether to channel the funds to new business growth.
UOBKH Research downgraded the stock to a “hold” with an unchanged target price of 35 sen a share.
The research house kept its enterprise value over earnings before interest, taxes depreciation and amortisation-derived enterprise multiple at seven times, to reflect the group’s financial resilience and commitment to reward shareholders in the current industry cycle.
UOBKH Research maintained its earnings forecasts for Velesto.
The key risks cited are unexpectedly low utilisation and a sharper-than-expected drop in rig charter rates. Unexpectedly low dividend payouts for a sustained period may also negatively impact investor confidence in the stock, the research house said.
