27 November 2024

$DELEUM / 5132 (DELEUM BERHAD) ANALYSIS Q3 FY 2024 – “Strong Performance and Attractive Valuation for Investors."

Current Stock Price and Valuation: Compelling and Attractive addition to a diversified portfolio especially in a market with limited investment-grade stocks."

Deleum - Based on an estimated FY 2024 EPS of 17 Sen, Deleum’s valuation is expected to range between RM1.70 and RM2.04 using P/E ratio of 10 to 12.

The Q3 FY 2024 EPS was 6.24 Sen and 9 mths Q3 FY 2024 YTD EPS was 14.12 Sen (FY 2023 9mths YTD = 7.74 Sen and FY 2023 was 11.39 Sen)

Deleum is currently trading at RM1.43, which appears to be a bargain considering its potential. The share price has ranged from 86 Sen to RM1.69 over the past year.

Based on FY 2023 earnings per share (EPS) of 11.39 Sen, it is trading at historical P/E ratio is 12.6. Using the 4 rolling quarters to 30 sept 2024 EPS of 17.77 Sen, it is trading at PE 8.05. P/E ratio based on the trailing twelve months (TTM) is more relevant for current valuation given its increasing profit trend.

Deleum is on track to achieve a record corporate profit this financial year 2024.

•Q3 profit before tax (PBT) increased 91.7% to RM48.6 million in the third quarter ended 30 September 2024 from RM25.3 million previously.
•Q3 FY 2024 Net profit attributable to shareholders more than doubles to RM25.1 million (Q3 FY 2023 = RM12.2 million) and 9 mths YTD 3Q 24 was RM56.7 mil (Q3 FY 2023 9 mth YTD = RM31.1 million) with EPS of 6.24 Sen and 14.12 Sen respectively for Q3 and 9 mths YTD and achieving new record high quarterly net profit since listing.
• Strong OIS segment growth supports record results; new contract wins strengthen future performance
The performance was due to the improved profit margin for the Power and Machinery (P&M) segment and the continued positive momentum of the Oilfield Integrated Services (OIS) segment.

PROSPECTS Brent crude prices remain within the expected price range, swayed by concerns over global oil demand growth, as well as declining oil inventories and the decision by OPEC+ members to delay production increases until December 2024. Despite the confluence of events, capital expenditures for the oil and gas (O&G) sector in Malaysia remain robust, benefiting local service providers including Deleum. Deleum was recently awarded two significant contracts by Petronas Carigali Sdn Bhd for the provision of Pan Malaysia offshore maintenance, construction, modification (MCM) and hook-up and commissioning (HUC) services. These contracts represent a major addition to the Group’s MCM portfolio, signalling a positive shift as the Group moves towards bolstering its order book for the Oilfield Integrated Services (OIS) segment, setting a foundation for renewed growth. Deleum has seen a strengthening of the OIS segment this year and is optimistic that the segment will continue to drive the Group’s performance for the current financial year together with the Power and Machinery segment. The progress aligns with our objective to achieve a more balanced earnings contribution across both segments. Looking ahead, while we remain cautious of market uncertainties associated with the O&G industry, we anticipate the overall financial year to be positive

Investment merits:

• Increasing profits trend with a dividend policy of 50% payout.

• Consistent dividend since FY 2022 (FY 2022 =5.25 Sen, FY 2023 =5.7 Sen and FY 2024 interim Dividend 4 Sen)

• Return on equity of above 10% and with FY 2024 9 mth of 12.9%

• Cash balance of RM206.6 mil (51.4 Sen per share) and the cash balance at 31 Dec 2023 was RM215.9 mil. The total bank borrowings @30 Sept was RM15.4 mil

• Consistent operating cash generated from operation amounting to RM46.0 million to 30 Sept 2024 and FY 2023 was RM78.8 million

• Positive outlook of the industry with growth and Company heading toward record corporate profit

Financial Information
Market Capital (RM): 574.222 mil @ RM1.43
Number of Share: 401.554 m
EPS FY 2023 (cent): 11.39
EPS FY 2024 (cent): 17.77 (4 Rolling quarters)
P/E Ratio: 8.047
NA per share: RM 1.01 Sen
ROE: 16.15%
CAGR Revenue: 4.9%
CAGR PAT: 11.0 %

OVERVIEW OF OPERATIONS

Deleum’s core business operations are centered on the upstream activities of the oil and gas sector, with a particular focus on exploration and production activities. Drawing from over four decades of extensive experience, the Group has solidified its position as a reliable partner, capable of delivering comprehensive solutions that contribute to the success and efficiency of exploration and production activities. Our core business segments continue to be Power and Machinery (“P&M”), Oilfield Services (“OS”), and Integrated Corrosion Solution (“ICS”). The detailed performance write-up by segments is in the ‘Segmental Performance’ section of the Annual Report FY 2023.