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VELESTO (5243)     VELESTO ENERGY BERHAD job wins could be start of recovery in jack-up rigs space

KUALA LUMPUR: There could be an ongoing lift to Velesto Energy Bhd's jack-up rigs utilisation over the next 12 months amid the start of a recovery in the space.

Maybank Investment Bank Research said with two job wins in 1Q21, this was the start to a turnaround beginning in 2H21.

"For that, we raise our EV/ replacement value to 1x (mean valuation) vs. 0.7x previously (-1SD) to reflect a cyclical recovery outlook.

"This equates to a higher TP of MYR0.30 (vs. MYR0.13 previously)," it said while reiterating its "buy" call.

It said the group's sub-par financials have already been priced in with upcoming 4Q20 results expected to be poor and the underperformance extending into 1H21 due to low utilisation.

The research house has maintained its estimates with utilisation rates of 64%, 60% and 74% for FY20, FY21 and FY22 respectively.

Velesto has secured two contracts from Petronas Carigali Sdn Bhd for the provision of jack-up rigs.

Naga 2 is assigned to drill three firm wells with expected commencement date between May 15 and June 2021.

Naga 5 will drill one firm well with the option of a 1+1 well programme.

Naga 5 operations will commence in April 5.

All in, the firm contracts minus extension are worth US$20.8mil.

https://www.thestar.com.my/business/business-news/2021/03/22/velesto-job-wins-could-be-start-of-recovery-in-jack-up-rigs-space

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