• Maintain BUY (TP: RM0.30). Velesto Energy (Velesto) FY23 core profit of RM100mn were above both our and consensus’ estimate at 155% and 143% respectively. 4Q23 core earnings jumped to RM67mn on the back of strong utilisation rate (UR) of 94% and higher daily charter rate (DCR) of USD99k/day. The company surprised with its maiden interim DPS of 0.25sen, the first dividend announced since FY14. We expect the company to continue benefitting from rising daily charter rate (DCR) amidst the supply shortage. Maintain a BUY call on Velesto with TP RM0.30 which implies 17x FY24F P/E and 1x FY24F P/B.

• Key highlights. 4Q23 revenue hit the highest since its listing at RM359mn driven by (i) higher average DCR for jack-up that rose further by 2.1% QoQ to USD99k/day from USD97k/day in 3Q23, (ii) higher jack-up rig UR of 94% (4Q22: 90%, 3Q23: 62%), (iii) higher UR of hydraulic workover unit (HWU) which is operating under Integrated segment. For full year 2023, UR was markedly higher at 83% against 62% in FY22. Meanwhile, DCR was also higher at USD94k/day against USD77k/day in FY22.

• Earnings forecast. No change is made to our earnings forecast pending analyst briefing on 28th Feb 2024. We see upside risk to our earnings forecast stems from higher DCR.

• Outlook. We expect a stronger performance by Velesto in FY24 as the company is tendering for jobs at a market rate of USD130k/day.

Source: BIMB Securities Research - 28 Feb 2024