Oiltek International Ltd: Driving Growth Through Innovation

Oiltek International Ltd, a specialist in the engineering, procurement, construction, and commissioning (EPCC) of edible and non-edible oil refining plants, continues to demonstrate its commitment to growth. At the Value Up Conference held on January 14, 2025, the company reiterated its strategic focus on expanding its business portfolio through organic growth and mergers and acquisitions (M&A).

Operating an asset-light model, Oiltek has carved a niche in the market with its patented process technologies, which create significant entry barriers for competitors. With over 44 years of experience, Oiltek has a robust track record in designing and assembling refining plants. The company highlighted its growth catalysts, including Malaysia’s increasing biodiesel blending requirements and the long-term potential of Sustainable Aviation Fuel (SAF), which accounted for a mere 0.3% of global jet fuel production in 2023. Management also emphasized its focus on larger-scale projects, building its Product Sales and Trading segment, and pursuing recurring income streams through strategic investments, joint ventures, and alliances.

Currently listed on the Catalist Board of the Singapore Exchange, Oiltek’s management is exploring an upgrade to the mainboard. This move could attract more institutional interest and enhance its investment appeal.

Financial Performance and Valuation

Oiltek’s FY26F valuation has been rolled over, resulting in a higher target price of S\$1.44, up from the previous S\$1.32. With a current share price of S\$1.06, this represents a 35.8% upside potential. The company boasts a strong order book of RM391.1 million as of December 23, 2024, with anticipated wins in biodiesel and SAF projects. Key risks include order cancellations, forex fluctuations, and raw material price volatility.

ESG Highlights

Oiltek is committed to sustainability, integrating environmental considerations into its product designs. Notably, its flagship processes convert waste into energy, such as transforming sludge oil into biofuels. The company also demonstrates a strong focus on diversity, with 60% of senior management aged over 50 and initiatives to increase diversity at mid-to-senior levels.

Recommendation

CGS International maintains its “Add” rating for Oiltek, citing its strong growth prospects, robust order book, and potential for accretive M&A activities.

BM GreenTech Bhd: A Mixed Outlook

BM GreenTech Bhd operates in the renewable energy sector and is currently not rated by CGS International. With a share price of MYR 1.71 and a market capitalization of USD 264 million, the company faces challenges with a three-year EPS CAGR of -31.4%. However, its recurring ROE of 12.2% and dividend yield of 1.3% provide some stability.

Despite its financial challenges, BM GreenTech remains an industry player with opportunities for improvement. However, its relatively high P/E ratios of 21.8x for CY25F and 19.9x for CY26F indicate limited valuation appeal compared to its peers.

Samaiden Group Bhd: Focused on Renewable Energy

Samaiden Group Bhd, another renewable energy company, is also not rated by CGS International. With a share price of MYR 1.24 and a market capitalization of USD 113 million, the company shows moderate potential. Its P/E ratios of 20.8x for CY25F and 17.3x for CY26F highlight its valuation challenges.

The company has a negative three-year EPS CAGR of -5.8%, but its recurring ROE of 15.3% and dividend yield of 1.1% demonstrate a certain degree of financial stability. Samaiden’s focus on renewable energy aligns with global trends, offering long-term growth potential despite short-term hurdles.

Kelington Group Bhd: Strong Fundamentals

Kelington Group Bhd stands out among its peers with a robust market capitalization of USD 520 million and a share price of MYR 3.40. The company is not rated by CGS International but exhibits strong financial metrics, including a recurring ROE of 28.4% and a dividend yield of 2.1%.

The company’s P/E ratios of 18.2x for CY25F and 17.9x for CY26F indicate a relatively better valuation compared to BM GreenTech and Samaiden. Kelington’s focus on innovative solutions in the engineering and construction sectors positions it well for sustained growth.

Peer Comparison

The peer group average P/E ratios stand at 20.3x for CY25F and 18.4x for CY26F, with an average recurring ROE of 18.6% and a dividend yield of 1.5%. Oiltek’s competitive metrics underscore its strong positioning within the agribusiness sector.