[%apcd%]
Research by HLIB
Buy - TP RM0.35

"Remarkable showing"

Velesto chalked up 2Q24 core net profit of RM62.8m (+38% QoQ, +2.6x YoY), bringing 1H24 results to RM108.3m (+239%). The results were inline with our but above consensus estimates. We expect 2H24 to be slightly weaker HoH due to lower fleet utilisation, arising from SPS scheduled for Naga 2 in 3Q24 and Naga 5 and 6 in 4Q24. The market is jittery over Petronas’s potential capex cut and deferral on some greenfield projects. However, we remain bullish given as its work orders for Naga 2,4 and 6 which are chartered by Petronas remains intact for 2H24. Even if Petronas were to defer some drilling programs possibly in 2H25, Velesto is still entitled to standby rates for the chartered rigs. Thirdly, Petronas is able to sublet the unused rigs chartered from Velesto to other parties, allowing Velesto to still capture the full rates. Maintain BUY rating on the stock with unchanged TP of RM0.35 – pegged to a PE multiple of 14x of FY25f profits.

Analyst:
Brian Chin
[%XCRr%]

$KLSE-VELESTO
Research by HLIB
Buy - TP RM0.35

"Remarkable showing"

Velesto chalked up 2Q24 core net profit of RM62.8m (+38% QoQ, +2.6x YoY), bringing 1H24 results to RM108.3m (+239%). The results were inline with our but above consensus estimates. We expect 2H24 to be slightly weaker HoH due to lower fleet utilisation, arising from SPS scheduled for Naga 2 in 3Q24 and Naga 5 and 6 in 4Q24. The market is jittery over Petronas’s potential capex cut and deferral on some greenfield projects. However, we remain bullish given as its work orders for Naga 2,4 and 6 which are chartered by Petronas remains intact for 2H24. Even if Petronas were to defer some drilling programs possibly in 2H25, Velesto is still entitled to standby rates for the chartered rigs. Thirdly, Petronas is able to sublet the unused rigs chartered from Velesto to other parties, allowing Velesto to still capture the full rates. Maintain BUY rating on the stock with unchanged TP of RM0.35 – pegged to a PE multiple of 14x of FY25f profits.

Analyst:
Brian Chin
brianchy@hlib.hongleong.com.my