Effectively January 1st, 2020, the International Maritime Organization (IMO) had issued the IMO 2020 emission regulations to force vessels operators to use only lower-sulphur bunkering oil – and this is especially true for Very-Low-Sulphur Fuel Oils (VLSFO) which perfectly fulfils the 0.5% sulphur content requirement as compared with the legacy high-sulphur content fuel oils.
Historically, we can see an obvious uptrend for the VLSFO fuel oil in the Asia Region. Please refer to the industry report on price trends below.
This indicates a spike in demand for VLSFO and the premium for oil bunkering companies would increase – in investor’s term, premium means “higher profit margin”.
Apart from that, we also see the demand for oil & gas sector slowing picking up – and these vessels, ships all require fuel oil to keep them moving offshore. Hence, it would be a double whammy good news for those who are in the sector already. You might be asking now – are they any listed companies that are involved in the said sector?
Techfast Holdings Berhad (TECFAST) had recently ventured into the oil bunkering business via the acquisition for 35% of a non-listed oil bunkering company – CCK Petroleum. CCK Petroleum had years of experience in the fuel oil industry and coupled with the financial capabilities of TECFAST, the two should have some “spark” in the proposed acquisition.
Interestingly, the company also secured several huge contract for the supply of their fuel oil.
However, it was also very interesting to note that the share price did not maintain after the hype of getting contract. Retail investors seems to be underestimating the impact of these contracts on the net profit of the company.
believe there should be value to be undermined in this company amidst
the spike of VLSFO. Is TECFAST at a safe price now? I believe so! We
shall share more about the actual profitability of this company in the