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28 February 2023. Tuesday
KUALA LUMPUR (Feb 28): Shares in Velesto Energy Bhd slumped 27% in active trade on Tuesday (Feb 28) after it posted a net loss of RM26 million for the fourth quarter ended Dec 31, 2022 (4QFY2022), versus a net profit of RM5.43 million a year ago, as the bottom line was hit by higher operating expenses, finance costs and taxation.
At 9.12am, Velesto fell 7.5 sen to 20 sen, with 109.3 million shares traded.
Velesto’s earnings drop was despite the higher quarterly revenue achieved at RM243.07 million, 53% higher than the RM158.48 million reported for 4QFY2021, driven by higher utilisation of the group’s jack-up drilling rigs.
Hong Leong Investment Bank (HLIB) Research had downgraded Velesto to “sell” at 28.5 sen, with a lower target price (TP) of 21 sen (from 29 sen) and said Velesto reported a 4QFY2022 core net profit of RM2.6 million (-82% q-o-q, -52% y-o-y), which brought FY2022 core net loss to RM71.8 million (FY2021: -RM182.1 million).
In a note on Tuesday (Feb 28), the research house said it deemed the results to be below house (FY22f: -RM17.9 million ) and consensus expectations (FY22f:-RM27.9 million).
HLIB said it is expecting a substantially stronger showing in FY2023, as Velesto has guided at significantly higher utilisation rates and daily charter rates for its jack-up drilling rigs.
“With that, we are forecasting Velesto to turn profitable in FY23-24, as we expect to see a pick-up in drilling rig tenders this year amid the current elevated crude oil price environment, leading to increased activity in the sector.
“We downgrade Velesto Energy to ‘sell’ with a lower TP of 21 sen — pegged to an unchanged P/E multiple of 14x on revised FY24f profits.
“We think Velesto’s valuations are rich and has gone past its fundamentals, despite its strong turnaround prospects and growth trajectory,” it said.
Read also:HLIB downgrades Velesto, lowers target price to 21 sen
