Broker: Maybank Investment Bank Berhad
Date of Report: July 2, 2025
Velesto Energy Berhad: New Contract Win, Rising Cash, and Emerging Growth Catalysts for 2025
Overview: Velesto Secures a Significant Contract, Maintains Bullish Outlook
Velesto Energy Berhad (VEB MK), a leading provider of drilling and oilfield services in Malaysia’s oil and gas sector, has recently announced a contract win for its N5 jack-up rig from PTTEP. The contract covers 15 firm wells with up to 8 optional wells, commencing at the end of June 2025. This development marks another significant step in Velesto’s operational momentum, with most of its rigs now committed for FY25 and potential for full utilization in FY26 should the extension be exercised.
- Target Price: MYR 0.19 (unchanged), pegged to 10x FY25E PER
- Current Share Price: MYR 0.185
- Market Capitalisation: MYR 1.5B (USD 362M)
- Issued Shares: 8,216 million
- BUY rating maintained
Contract Win Details: Robust Dayrate and Utilization Prospects
- Implied Dayrate: USD 105,000–110,000, in line with recent Vietnam contracts
- Contract Value: Estimated at USD 40 million for 15 wells (approx. 365 days)
- Optional Wells: 8 additional wells could extend utilization by 9 months into FY26
- Fleet Utilization: 5 of 6 rigs utilized for FY25; only N3 likely to remain unutilised
Financial Highlights: Strong Cash Flow and Attractive Yields
- Net Cash Position (as of Mar 2025): MYR 104.7 million (up 60% QoQ)
- Dividend Payout Ratio (DPR) Outlook: At least 70% over FY25-27E
- Dividend Yield: Exceeding 7%
Business Diversification: New Growth Segments on the Horizon
Velesto’s tenderbook as of April 2025 stands at MYR 2.8 billion. Notably, 21% (MYR 588 million) comprises non-drilling contracts, including hydraulic workover units (HWUs) and anchoring services—leveraging Velesto’s core oil & gas capabilities beyond drilling. These segments, if realized, could drive material growth and further establish Velesto as a key OGSE (Oil & Gas Services and Equipment) player in Southeast Asia.
Shareholder Structure and Price Performance
- Major Shareholders:
- Abrdn Malaysia Sdn. Bhd. – 6.4%
- Hong Leong Asset Management Bhd. – 2.8%
- The Vanguard Group, Inc. – 2.3%
- 52-week High/Low: MYR 0.28 / 0.14
- Free Float: 100%
- 3-month Average Turnover: USD 0.9 million
Key Financials and Forecasts
| FYE Dec (MYR m) |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Revenue |
1,215 |
1,360 |
1,223 |
1,185 |
1,166 |
| EBITDA |
307 |
522 |
424 |
401 |
392 |
| Core Net Profit |
100 |
208 |
165 |
156 |
155 |
| Core EPS (sen) |
1.2 |
2.5 |
2.0 |
1.9 |
1.9 |
| Net DPS (sen) |
0.3 |
1.3 |
1.4 |
1.3 |
1.3 |
| Core P/E (x) |
19.0 |
6.1 |
9.2 |
9.7 |
9.8 |
| P/BV (x) |
0.8 |
0.5 |
0.6 |
0.6 |
0.6 |
| Net Dividend Yield (%) |
1.1 |
8.1 |
7.6 |
7.2 |
7.1 |
| ROAE (%) |
3.3 |
4.2 |
1.9 |
1.8 |
1.7 |
| EV/EBITDA (x) |
6.9 |
2.3 |
3.0 |
2.8 |
2.4 |
| Net Gearing (%) |
9.4 |
net cash |
net cash |
net cash |
net cash |
Valuation and Peer Benchmarking
Velesto’s target price of MYR 0.19 is set at 10x FY25E PER, which aligns with the sector’s historical upcycle averages. The peer comparison focuses on Dayang Enterprise (DEHB MK), which has shown a 1-year forward PER range of 3.9x to 16.4x, averaging 10.1x during previous cycles.
Risks and Considerations
Key risks to Velesto’s outlook include:
- Sharp declines in crude oil prices
- Inability to secure new contracts, impacting rig utilization rates
- Failure to lock in higher dayrates for future contracts
ESG Profile: Progress and Areas for Improvement
Velesto has made steady progress on its sustainability agenda:
- Began sustainability reporting in 2017; adopted systematic data gathering and 6 UNSDGs by 2019
- Sustainability Blueprint developed (2020); emissions reduction goals set in 2022
- FTSE4Good Bursa Malaysia Index constituent; multiple governance and safety awards
- Board diversity: 44% female, 56% independent
- Zero major environmental spills in FY23; zero fatalities and zero lost time incidents
However, the company’s “E” (environmental) quantitative metrics show a rising trend in diesel, electricity, and water consumption, as well as higher GHG emissions (Scope 1 & 2 at 63,946 TCO2e in FY23).
ESG Quantitative Metrics (2021-2023)
- Scope 1 emissions: 0.0530–0.0635 mtCO2e
- Scope 2 emissions: 0.0002–0.0005 mtCO2e
- GHG intensity (tCO2e/MYR mil revenue): 141 (FY21) to 53 (FY23)
- Total waste generated: 137.8 MT (FY22) to 223.7 MT (FY23)
- Average water consumption per rig: 16,882.5 MT (FY23)
- LTIF: 0.5 (FY21–22), 0.0 (FY23)
- % women in management: 45% (FY21), 29% (FY22), 26% (FY23)
- Female directors on board: 33–44%
Velesto achieved a 51/100 overall ESG score, indicating an average ESG rating. The company has established frameworks and targets, but must improve its environmental metrics further.
Summary: Outlook and Investment Case
Velesto Energy Berhad continues to reinforce its market position with new contract wins, robust cash flows, prudent balance sheet management, and an expanding tenderbook with diversification prospects. With an attractive dividend yield, net cash position, and a strong pipeline of opportunities, Velesto remains well-positioned for resilient performance in the Southeast Asian oil & gas services landscape.
- BUY rating reaffirmed; Target Price MYR 0.19
- Key catalysts: Successful contract execution, further business diversification, and continued cash generation
- Monitor: Oil price volatility, contract rollovers, and ESG improvements
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