KUALA LUMPUR (Sept 14): Kenanga Research has upgraded Velesto Energy Bhd to “outperform" at RM11.5 sen with a higher target price (TP) of 16 sen (from eight sen) and said it sees the regional and local jack-up rig market improving, with marketed utilisation reaching a high of 91% in Southeast Asia and 100% in Malaysia.

In a note on Wednesday (Sept 14), the research house said it believes this offers further upside to Velesto’s current rig utilisation and charter rates.

“Hence, we may start to see Velesto turning around as soon as 2HFY22.

“As such, we lowered our FY22 loss assumption by 20%, while forecasting a turnaround to profit of RM87 million in FY23 (versus previous loss forecast of RM49 million), as we raised both our rig utilisation and charter rate assumptions.

“Our current forecasts are based on rig utilisation assumptions of 60%-80% and day rates of US$75,000-US$85,000.

“We upgrade to 'outperform', with a TP of 16 sen.