MIDF maintains ‘buy’ on Deleum after 4Q earnings jump 31%

KUALA LUMPUR (March 1): MIDF Research has maintained its ‘buy’ call on Deleum Bhd and increased its target price (TP) after the group’s net profit improved 30.52% to RM13.77 million in the fourth quarter ended Dec 31, 2022 (4QFY2022) from RM10.55 million in the same period a year ago.

Deleum's TP was revised to RM1.22 per share from 98 sen previously, pegging it at a price-earnings ratio (PER) of 8.5 times to the revised earnings per share of 14.4 sen.

The PER is based on the five-year average of the upstream energy services and equipment company, said MIDF in a research note on Tuesday.

“Given that Deleum’s 4QFY2022 performance is above our expectation, and considering that stabilised crude oil will continue to support the upstream subsector, we revise our FY2023 and FY2024 earnings estimates upward by 45% and 47% respectively.”

MIDF said Deleum is expected to remain vigilant in the current market environment while continuing to offer the best of its services.

It observed that Deleum is investing in technologies, systems and processes to integrate all of its services into one solid and seamless foundation, with the aim to expand its operations in the near future to meet demand for its three major segments of power and machinery, oilfield services and integrated corrosion solutions.

Deleum’s higher net profit for the fourth quarter was due to improved results from its power and machinery segment, as well as reversal of impairment made on trade receivables under its oilfield services segment, a company filing to Bursa Malaysia on Tuesday showed.

Quarterly revenue also increased 64.43% to RM315.54 million from RM191.90 million on the back of higher sales activities in its power and machinery segment, offset by lower sales generated from the oilfield services and integrated corrosion solutions segments.

For the full year, it recorded higher net profit of RM42.14 million, up 146.87% from RM17.07 million in FY2021, against an improved revenue of RM698.05 million from RM558.36 million.

The higher net profit was due to better operating margins achieved across all three segments with reversal of impairment made on trade receivables, gain on disposal of plant and equipment and lower other operating expenses incurred.

In the afternoon session, Deleum’s share price rose 0.5 sen or 0.53% to 96 sen. Its market capitalisation was RM383.48 million.