Velesto Energy Berhad

Titan Trading Notes For Tuesday [21/1/2025]:

KLCI had a decent rebound back towards the 1572 points region with an overall positive market sentiment as our overall market started to rebound today from the huge selling activities last week. Daily trading volume however remains around the 2.9 billion mark for now.

Main stocks that showed strong buying momentum would be the likes of VELESTO, MYEG, GAMUDA, GENETEC, GIALOG, SIMEPROP, SNS, SALUTE, JCY, VANZO, UEMS, WINSTAR, and YBS, All of which were able to sustain their rallies throughout the day on the top volumes list.

$VELESTO / 5243 (VELESTO ENERGY BERHAD) since retracing back towards the RM 0.145+ main support levels over the past 2 months, been able to form a base and broke out towards the RM 0.195 regions today with good volume and buying momentum.

Although VELESTO is still showing a downtrend, this could be an early sign of a potential trend reversal soon. As long as able to hold above its RM 0.185 support, could breakout from its RM 0.21+ main downtrend resistance soon.

Will be monitoring VELESTO closely here.

$GAMUDA / 5398 (GAMUDA BERHAD) on the other hand since rebounding strong from its RM 3.85+ main support levels during last Friday, was able to resume the buying momentum today, breaking out towards the RM 4.35+ regions here.

Although still seems to be facing some selling pressure, overall still looking not too bad here. As long as able to hold above its RM 4.30+ immediate support, could continue to trend back up towards the RM 4.50+ major resistance levels soon.

Will be monitoring GAMUDA closely here.

$CLOUDPT / 0277 (CLOUDPOINT TECHNOLOGY BERHAD) s higher low regions already on the daily chart. As long as able to hold above its RM 0.95+ immediate support, could continue on towards and beyond its RM 1.05 all time high levels soon for a bullish continuation pattern.

Will be monitoring CLOUDPT closely here

US President Donald Trump's inauguration will be happening tonight and I expect the market to have potential volatility going on. So do take that into account when planning your trades.

For better clarify on the overall direction, best to wait when US Market opens on Tuesday as it's a holiday tonight for them.

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by TA

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by MAYBANK

KUALA LUMPUR: Velesto Energy Bhd’s (Velesto) subsidiary Velesto Drilling Sdn Bhd has entered into a memorandum of understanding (MoU) with global technology company SLB to enhance rig capabilities.

© New Straits Times Press (M) Bhd

KUALA LUMPUR: Velesto Energy Bhd, through its subsidiary Velesto Drilling Sdn Bhd, has signed a memorandum of understanding (MoU) with global technology company, SLB to enhance rig capabilities.

KUALA LUMPUR: Stocks to watch on Friday include MyEG Services Bhd, Lay Hong Bhd, Malayan Banking Bhd (Maybank), Harrisons Holdings (M) Bhd, Atlan Holdings Bhd and Velesto Energy Bhd.

KUALA LUMPUR: Velesto Energy Bhd has completed its mandatory five-yearly special periodical survey (SPS) for its jack-up rig, Naga 6, in the Labuan shipyard.

© New Straits Times Press (M) Bhd

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by TA
BUY – TP RM0.30

"Lower Utilisation Eased by Enhanced DCR and Operational Efficiency”

We left VELESTO’s analyst briefing with the following key takeaways: (i) Better utilisation rate from Naga 3 with higher DCR from Naga 3 and 5; (ii) Lower overall utilisation rate to be seen in 2HFY24 & FY25; and (iii) Higher operational efficiency for Drilling Services. With the adjustment for lower overall utilization rates but higher day rates and improved operational efficiency, we adjust our earnings for FY24/FY25/FY26 by +4.3%/- 11.7%/+24.1%. We revised our TP slightly to RM0.30/share (previously RM0.34/share) based on 12x CY25 EPS. Maintain Buy

Analyst:
Lee Yun Leon
yllee@ta.com.my

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by Kenanga
Outperform - TP RM0.30

"Possessing the Dragon’s Resilience"

VELESTO's 1HFY24 results were deemed within our expectations but came in below consensus. We anticipate weaker earnings in 2HFY24 as three rigs are scheduled for maintenance. We think that while Petronas exploration activities might ease in Sarawak, there is no demand shortage from the region although slightly lower utilisation on shorter charters may ensue, leading to our FY25 earnings cut of 13%. The same magnitude of cut in TP, to 30 sen, is applied, while maintaining our OUTPERFORM rating.

Analyst:
Lim Sin Kiat, CFA
limsk@kenanga.com.my

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
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

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by TA
Buy - TP RM0.34

"2QFY24 Delivers Strong, Expected Results"

After incorporating an ESG Premium of 3%, we increase our TP to RM0.34/share (previously RM0.33/share) pegged to 12x CY25 EPS. VELESTO is expected to continue benefiting from escalating DCR amidst tight jack-up drilling rig market. Maintain Buy.

Analyst:
Lee Yun Leon
yllee@ta.com.my

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by CGS
Add - TP RM0.30

"Still waiting for clarity on several fronts"

■ 1H24 core net profit of RM108m made up 66% of our full-year forecast; we consider this broadly in line as we expect 2H24F to be weaker hoh.
■ In light of upcoming potential Petronas capex cuts, investors have pushed Velesto’s share price down to a level that implies a major future downturn.
■ Reiterate Add with an unchanged DCF-based TP of 30 sen, although we think investors are holding back pending clarity on Petronas capex plans.

Analyst:
Raymond YAP, CFA
E raymond.yap@cgsi.com

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by CGS
ADD – TP RM0.30

"Depressed share price awaits its catalyst”

■ We cut our FY24-26F EPS forecasts and reduce our DCF-based TP to 30 sen, as we moderate our assumptions given potential Petronas capex cuts.
■ Still, we reiterate Add as, in the rush to sell, investors have pushed Velesto’sshare price down to a level that implies a major downturn.

Analyst:
Raymond YAP, CFA
raymond.yap@cgsi.com

$VELESTO / 5243 (VELESTO ENERGY BERHAD)

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by Maybank
BUY – TP RM0.32

" Visiting Naga 2 - likely shielded from client’s capex deferment”

We hosted a site visit to Velesto’s Naga 2 jack-up drilling rig in Seatrium’s yard, Singapore. Post-visit, we tweak FY24-26E earnings by +0%/-5%/+0% to account for a slightly lower blended rigs utilisation rate in FY25E as we factor in a temporary softness in the rig market. Our revised FY24-26E assumptions are: i) utilisation rates of 82%/90%/83% and ii) average realised DCRs of USD119k/127k/135k. Our TP is reduced marginally to MYR0.32 (-1sen) based on unchanged 13x mid-FY25E EPS. Maintain BUY. Velesto is one of our sector’s top picks.

Analyst:
Jeremie Yap
jeremie.yap@maybank-ib.comcom

$VELESTO / 5243 (VELESTO ENERGY BERHAD)

Sharing from broker

*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.

PETALING JAYA: UOB Kay Hian (UOBKH) Research states that Velesto Energy Bhd (VEB) is unlikely to leverage fully on any upside to the daily charter rates (DCR) for jack-up (JU) rigs, given its locked-in DCR with Petroliam Nasional Bhd (PETRONAS) but shields it from the current discount in the South-East Asia region’s DCR as compared to other parts of the world.

OIL & GAS
$DIALOG / 7277 (DIALOG GROUP BERHAD) $PETDAG / 5681 (PETRONAS DAGANGAN BHD) $VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by Kenanga
Overweight

“Opportunities in Mid-stream and Upstream”

We maintain OVERWEIGHT on the sector. We keep our Brent crude oil price forecasts at USD84/bbl and USD79/bbl for CY24 and CY25 based on the assumption that OPEC+ will discontinue production cuts by the end of CY24 and gradually ramp up production in CY25. These oil price levels are supportive of local upstream investment, especially considering the under-investment by producers in the early 2020s. We favor owners of offshore supply vessel (OSV) and jack-up rigs on favourable rates on the back of a supply crunch and the midstream storage segment due to arbitrage opportunities arisng from a contango in the oil market and oil traders having to structurally hold higher inventories as part of supply-chain risk management amidst heightened geo-political tensions.

Analyst(s):
Lim Sin Kiat, CFA
limsk@kenanga.com.my

OIL & GAS
$DIALOG / 7277 (DIALOG GROUP BERHAD) $ARMADA / 5210 (BUMI ARMADA BERHAD) $VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by HLIB
Overweight

“Bracing for a post-monsoon euphoria”

We retain our OVERWEIGHT rating on the sector with unchanged average Brent oil price forecasts at USD85/bbl for 2024/2025. Post monsoon, we believe local offshore activities will run at full throttle and lift topside maintenance contractors and OSV fleet owners in the coming quarters. The award of Pan Malaysia MCM-HUC packages, POV tender and Project Safina 2 are key rerating catalysts. With oil price staying above USD80/bbl, we expect drilling and FPSO markets to remain tight in view of rising E&P activities around the globe.

Analyst(s):
Brian Chin
brianchy@hlib.hongleong.com.my

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by CGS
Add – TP of MYR 0.325

“Earnings visibility building for FY25-26F”

Findings from our bottom-up analysis of the rig schedule disclosed by Velesto in May 2024 suggest that it is on track to deliver 82% utilisation in FY24F (as we expected), given that all six of its jack-up (JU) rigs have locked-up their contracts already. The key uncertainty is for 2H24F, where Velesto will send three of its rigs (Naga 2, Naga 5 and Naga 6) for special periodic survey (SPS); this could take longer than expected if certain equipment need to be replaced, and if so, could delay the commencement of the subsequent drilling jobs. However, Velesto has allocated three months for each rig SPS, when usually only two months is required; hopefully, this will be sufficient to account for any unforeseen surprises

Analyst(s):
Raymond YAP, CFA
raymond.yap@cgsi.com

OIL & GAS
$DIALOG / 7277 (DIALOG GROUP BERHAD) $YINSON / 7293 (YINSON HOLDINGS BERHAD) $VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by Kenanga
Overweight

“1QCY24 Report Card: Sustained Earnings Momentum”

We maintain our OVERWEIGHT call on the sector. The sector’s earnings delivery (against our forecasts) in 1QFY24 was comparable sequentially, with most companies beating or meeting our expectations, particularly those in the offshore support vessel (OSV) and midstream segments. We expect the earnings strength for these subsectors to sustain into coming quarters and Brent crude prices to average at USD84/bbl in 2024, a level that is conducive to upstream spending by oil majors. The upstream services sub-segment will remain the star in 2024 as Petronas ramps up in spending domestically. Our sector top picks are DIALOG (OP; TP: RM3.18), YINSON (OP; TP: RM3.47), and VELESTO (OP; TP: RM0.34).

Analyst(s):
Lim Sin Kiat, CFA
limsk@kenanga.com.my

PETALING JAYA: Velesto Energy Bhd has tendered for a deepwater drillship project and plans to be more asset light this year, according to TA Research.

General Meetings: Outcome of Meeting

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by TA
Buy – TP RM0.33

“Strong Earnings to Sustain in 2QFY24"

We left VELESTO’s analyst briefing with the following key takeaways: (i) expect temporary downward pressure on DCR in 2025/2026; (ii) strong earnings to sustain in 2QFY24; and (iii) aims to venture into production services and pledged net zero emission by 2050. No change to earnings forecasts. Maintain Buy with unchanged TP of RM0.33/share based on 12x CY25 EPS. VELESTO is expected to continue benefiting from escalating DCR amidst tight jack-up drilling rig market.

Analyst:
Ong Tze Hern
thong@ta.com.my

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by Kenanga
Outperform – TP RM0.34

“Dragons on the Prowl"

VELESTO said that the recent suspension of rigs by Saudi Aramco has no impact on the jack-up rig market in Southeast Asia. It projects global rig utilisation to remain elevated at 88% in FY25, even after taking into consideration the rigs diverted from Saudi Aramco. We maintain forecasts, TP of RM0.34 and OUTPERFORM call.

Analyst:
Lim Sin Kiat, CFA
limsk@kenanga.com.my

$VELESTO / 5243 (VELESTO ENERGY BERHAD)

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by TA
Buy – TP RM0.33

“Strong 1QFY24 Results as Expected"

Reiterate Buy with an unchanged TP of RM0.33/share pegged to 12x CY25 EPS. VELESTO is expected to continue benefiting from escalating DCR amidst tight jack-up drilling rig market.

Analyst:
Ong Tze Hern
thong@ta.com.my

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by HLIB
Buy (Maintain) – TP RM0.35

“Respectable showing"

Velesto raked in 1Q24 core earnings of RM45.5m (-32% QoQ, +220% YoY), which is inline with our estimate (24%) but above consensus (28%). Post-umbrella contract renewal with Petronas Carigali, the higher DCR of c.USD140k (from USD100-100k) will be reflected from mid-2024 onwards and contribute positively to Velesto’s earnings in the coming quarters. Barring unforeseen downtime, we expect its average JU rigs utilisation to stay above 90% in 2Q24 but a relatively lower fleet utilisation in 2H24 due to SPS scheduled for Naga 2 and 5 in 3Q24 and Naga 3 and 6 in 4Q24. Full year utilisation of FY24 shoul stand at 85% (vs 83% in FY23). Adjust our FY24f/25f earnings by +0.1%/-0.5% after imputing annual report updates and introduce FY26f forecast at RM200.3m. Maintain BUY rating with unchanged TP of RM0.35 – pegged to a PE multiple of 14x of FY25f profits.

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

$VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by CGS
Add – TP RM0.325

“Business stays strong; new ventures beckon"

■ 1Q24 core net profit was 23% of our previous full-year forecast, below expectations as certain rig items were subject to accelerated depreciation.
■ This has no impact on cashflows; we raise our DCF-based TP to 32.5 sen on a lower Ke rate of 10.6% (vs. 11.2%) as Velesto’s long-term beta has fallen.
■ Reiterate Add as Velesto may deliver very strong results in 2Q24F, it may secure long-term work for two JU rigs, with drillships as a potential venture.

Analyst:
Raymond YAP, CFA
raymond.yap@cgsi.com

KUALA LUMPUR: Velesto Energy Bhd's net profit jumped more than double to RM46.81 million in the first quarter (Q1) ended March 31, 2024 from RM14.22 million a year ago. 

© New Straits Times Press (M) Bhd