• Maintain HOLD (TP: RM0.33). Reservoir Link Energy (RL) 1QFY25 result showed a small headline PATAMI of RM684k mainly underpinned by (i) realised forex gain of RM1.4mn, and (ii) unrealised forex gain of RM0.8mn. Excluding unrealised forex gain, the company is barely profitable. Nonetheless, we make no changes to our FY25F earnings estimate as we expect stronger earnings in coming quarters. This is in anticipation of eventual roll-out of solar projects and commencement of Integrated Well Continuity Services (IWCS) contract in oil and gas (O&G) segment where revenue recognition could be lumpy. Maintain RL as a HOLD with an unchanged TP of RM0.33 which implies 10x FY25F P/E.

• Key Highlights. Revenue declined 36.6% YoY to RM42.9mn mainly dragged by slower RE EPCC segment (Table 2) amidst sluggish roll-out of Corporate Green Power Programme (CGPP) projects. Positively, it showed an early sign of recovery, growing by 26% QoQ to RM20.3mn. Besides that, recurring revenue from water treatment plant concession also grew to RM3.6mn which made up 9% of the group’s revenue.

• Earnings Revision. No change.

• Outlook. RL orderbook currently stands at RM210mn consisted of RM150mn in O&G segment and remaining RM60mn in RE segment. (1QFY24: RM210mn). This is roughly 1x FY23 revenue. Nonetheless, we remain optimistic with the company’s outlook primarily as we expect the company to be one of the beneficiaries from the expected roll-out of 800MW CGPP and 2GW LSS5 projects. Its RE tenderbook currently stands at RM400mn. On the other hand, O&G tenderbook is relatively larger at RM3.8bn mainly attributed to tenders in well decommissioning and coiled tubing unit (CTU) works amounting to RM2.2bn and RM1bn respectively. Note that the company has been selected as one of 34 panel contractors to participate in Petronas’ IWCS contract. We believe this bodes well for its earnings outlook moving forward.

Source: BIMB Securities Research - 28 Nov 2024