$VELESTO / 5243 (VELESTO ENERGY BERHAD)

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*VELESTO* (RM0.235) - *Grossly oversold*

May extend its consolidation for a while.

Must stage a decisive breakout above multiple Moving average (MA) hurdles at 0.245-0.265 to advance further 0.29-0.30 zones.

*Resistance :*
RM0.245-0.265-0.30

*Support:*
RM0.22-0.23

*Cut loss: RM0.215*

Fundamentally, Velesto at RM0.215 will be a great buy. Brian chose Velesto as top pick for O&G sector. His TP of RM0.35 is based on 14x FY25 PER.

Understand Velesto faces selling pressure as mkt whispering on potential cut back of capex by Petronas. A check with O&G players hv yet to provide any concrete clue on this speculation.

On capex of Petronas, it amounted to RM10.7bn in 1QCY24 (vs 1Q23: RM10.4bn)

Brian reckons Petronas will gradually ramp up capex in the coming quarters to total RM60bn by end of 2024.

As usual, Petronas allocated the lion’s share of its spending on Upstream (64%) driven by investments in Argentina, Brazil and Iraq.

Domestic capex rose 20% YoY to RM5.5bn, primarily for Near-shore Floating LNG project in Sabah and CO2 Sequestration Facilities in Sarawak.

Brian expects domestic capex to stay robust and supportive of the local OGSE sector as offshore production and maintenance activities pick up post-monsoon season.

Separately, understand Velesto is expected to report a decent set of earnings performances in 2QFY24.