MORNING CALL: 3/10/23

Maybank IB Research expects a strong 99% y-o-y boost in Velesto Energy’s FY24E net profit

Transcript

00:00 In focus this morning is offshore drilling contractor, Valesto Energy.

00:05 Maybank Investments Bank Research upgraded the stock from sell to hold, and raised its

00:10 target price from 20 cent to 24 cent.

00:14 Valesto settled yesterday at 26 cent.

00:16 Here are the positives.

00:18 According to Maybank, the regional drilling rig outlook for 2024 is robust, and Valesto

00:23 can expect to ride on higher daily charter rates or DCR as it wins new jobs in upcoming

00:29 quarters.

00:30 The research house assuming higher overall blended drilling rig DCR forecasts of US$110,000

00:37 in FY24 and US$120,000 in FY25 versus US$93,000 in FY23.

00:45 It's looking at higher average drilling rig utilisation rates of 82% in FY23, 88% in FY24

00:53 and 85% in FY25.

00:56 Coupled with operating leverage, these should boost FY24 net profit by 99% year-on-year,

01:02 following an expected turnaround in FY23.

01:05 For the upcoming third quarter though, Maybank is anticipating a marginal net loss, with

01:11 an estimated blended rig utilisation rate of 53% due to planned downtime.

01:16 But to believes, the negatives have been priced in.

01:19 It revised its EPS forecasts, cutting it by 13% for FY23 and raising it by 19% for FY24

01:27 and 12% for FY25.

01:29 Now what does the Streat say?

01:31 According to Bloomberg data, analysts are mixed on the stock, with two buys, four holds

01:36 and two sells.

01:38 Average target price 24 cent, Valesto closed yesterday at 26 cent, so that's a potential

01:43 downside of about 7.7%.

01:46 [Music]