PETALING JAYA: Velesto Energy Bhd
is facing a softer operating environment amid heightened regional rig competition and slightly lower daily charter rates (DCR).
Analysts, however, believe a recovery is waiting in the wings as tight rig supply in Malaysia and upcoming contract awards strengthen visibility for 2027.
They believe Velesto is well-positioned to secure long-term jobs for its Naga 4 and Naga 5 jack-up rigs, expected to start in the second quarter of financial year 2027 (2Q27) and 3Q27, respectively, according to CIMB Research.
These contracts, offshore Malaysia and lasting over a year, are expected to bring in DCR of US$90,000 to US$100,000 down slightly from past highs of US$110,000.
CIMB Research highlighted that ample regional rig supply could cap DCR recovery in the next six to 12 months.
“The long-anticipated recovery of the global jack-up rigs market is being delayed by the prolonged West Asia conflict.”
The research house said when Saudi Aramco previously suspended several rigs, some of those available units spilt over to bid for jobs in South-East Asia, capping immediate upside for charter rates.
However, it noted that this excess supply is gradually being absorbed back into the Middle East, and Malaysia’s local rig demand is projected to climb to 10 rigs in 2027 and 12 in 2028 (up from nine in 2026).
The research house said Velesto remains a compelling “buy” for investors looking toward a tightening regional rig market and steady domestic demand growth heading into 2027.
Despite trimming the target price to 29 sen, the stock still offers a solid upside of nearly 32% from its current 22 sen price, backed by a strong net cash balance sheet and attractive dividend yields projected between 11.6% and 14%.
CIMB Research cut its core earnings per share forecasts for 2026 to 2028 by 21% to 29% to reflect lower expected profit margins and softer charter rates.
