Letter of award from JX Nippon Oil & Gas Exploration (Malaysia)

Destini announced that wholly-owned Destini Oil Services had on 22 April 2020 received a letter of award for the provision of tubular equipment and services for JX Nippon Oil & Gas Exploration (Malaysia) Limited. JX Nippon and PETRONAS Carigali are joint venture partners for the exploration, development and production of crude oil and gas for Block SK10 offshore Sarawak. The contract is for four years with one-year extension option. We concur the contract is positive but impact on annual earnings remains difficult to estimate until contract commencement date and sum are confirmed.

Destini utilizing extension of time for issuance of annual report and 1QFY20 results

Destini had on 5 May 2020 announced that it will utilize the extension of time granted by Bursa Securities for the issuance of its Annual Report for FY2019 and quarterly reports for 1QFY2020 by 30 June 2020. It also said that an application for the extension of time to hold its AGM up to 30 September 2020 would be submitted.

Covid-19 pandemic continues to cloud business and market outlook

The Covid-19 pandemic and various degrees of movement lockdowns throughout the world have clouded the global economic, business and market outlook. Even though the movement control order has been relaxed in Malaysia, there is still no end in sight to the pandemic and fear of second wave infections has again heightened business and market uncertainties. Battered 2020 is best ignored by longer term investors. Destini’s share price of RM0.15 looks attractive going forward into 2021, implying FY21 forward PE of 9.4x based on our current forecast of 1.6 sen, which is subject to revisions pending release of 1QFY20 results and confirmation of value for the abovementioned contract award. We maintain our BUY call and target price of RM0.22 for Destini.

Source: Mercury Research - 13 May 2020