3 days ago
- Business
- New Straits Times
Velesto set for stronger 2H25 as rig utilisation rises
KUALA LUMPUR: Velesto Energy Bhd is poised for stronger earnings visibility for the remainder of the year as five out of its six jack-up drilling rigs have secured contracts, according to Maybank Investment Bank (Maybank IB).
The firm raised its financial year 2025 (FY25) earnings forecast by three per cent to account for a higher blended utilisation rate assumption of 72 per cent since the Naga 5 rig started work one month earlier than scheduled.
While second quarter (2Q25) results may be weaker on a quarterly basis due to scheduled maintenance for two rigs and slightly lower average daily charter rates (DCRs), Maybank IB expects earnings to be backloaded in the second half.
The firm projects a strong recovery with utilisation rates at 83 per cent for both the third and fourth quarters.
Maybank IB said Velesto's earnings peaked in FY24 in line with the local oil and gas services and equipment sector cycle.
"Earnings will likely decline annually, but the company should remain comfortably profitable. Despite lower DCRs from the peak, its rigs are well-utilised, providing Velesto with cash flow comfort," it said.
As at end-March 2025, due to strong operating cash flows from its drilling operations, Velesto's net cash position grew by 60 per cent on a quarterly basis to RM104.7 million.
This represents about seven per cent of Velesto's current market capitalisation.
"With a healthier balance sheet ahead, we raise our dividend payout ratio assumption to 100 per cent from 70 per cent previously, translating into a dividend per share of 2.1 sen and an attractive yield of over 11 per cent," Maybank IB added.
The firm said Velesto's drilling operations also benefit from a natural hedge against foreign exchange fluctuations as about 70 per cent of its operating and capital expenditures are denominated in US dollars.
Maybank IB kept its "Buy" call on Velesto with a target price of 18 sen.
