UOB Kay Hian Private Limited
31 July 2025

Oiltek International: Record-High Earnings, Robust Outlook, and Opportunity in Renewable Energy

Overview: Oiltek International Surges on Strong 1H25 Results

Oiltek International Ltd, a specialist in renewable energy equipment and engineering solutions, recently delivered its 1H25 financial results, posting record-high earnings that reinforce its growth trajectory. The company maintained its “BUY” rating, with a target price upgrade to S\$1.05, offering an attractive 18% upside. Backed by a robust orderbook and strategic positioning in the global oils, fats, and renewable fuel markets, Oiltek stands out as a compelling investment for 2025 and beyond.

Stock Snapshot and Performance

• Ticker: OTEK SP
• Sector: Industrials
• Share Price: S\$0.89
• Market Cap: S\$381.8 million (US\$296.4 million)
• Shares Issued: 429.0 million
• 52-Week High/Low: S\$0.925 / S\$0.143
• Major Shareholders: Koh Brothers Group 68.1%, Yong Khai Weng 6.43%
• FY25 NAV/Share: S\$0.18
• FY25 Net Cash/Share: S\$0.21
• Share Price Performance (YTD): +156.5%

1H25 Financial Performance: Robust Growth and Margin Expansion

Oiltek posted 1H25 revenue of RM101 million, essentially flat year-on-year, but achieved a net profit after tax and minority interests (PATMI) of RM14 million, marking a 38% increase over the previous year and forming 41% of the full-year forecast. Core PATMI, stripping out a forex loss of RM6 million due to the US\$/RM\$ movement, soared to RM20 million (+136% YoY), beating expectations by 9%. This stellar performance was driven by strong margin expansion in the refinery segment and effective cost savings (-16% YoY on selected projects).

Dividend Boost and Orderbook Strength

• Dividend: Interim dividend per share (DPS) of 0.5 Singapore cents declared, up 67% from 1H24’s 0.3 S cent. This represents a payout ratio of approximately 25% (vs 21% in 1H24).
• Orderbook: RM332.5 million as of 30 July 2025 (down slightly from RM355 million in February 2025), underpinning strong earnings visibility for the next 18–24 months.

Key Financials and Valuation Metrics

Strategic Positioning: Growth Drivers and Market Opportunities

Strong Demand in Global Oil and Fats Market

Oiltek anticipates sustained long-term growth in the edible and non-edible oil refinery segment, driven by increasing global consumption of oils and fats, population growth, and urbanization. The global fats and oils market is projected to expand from US\$241 billion in 2024 to US\$336 billion by 2033, providing significant tailwinds for the company’s engineering solutions business.

Renewable Energy: Biodiesel and SAF Upside

• Oiltek is set to benefit from expanding biodiesel mandates in Indonesia and Malaysia.
• Its expertise in processing palm oil mill effluent (POME) and other vegetable oil-based materials positions it to capture opportunities in hydrogenated vegetable oil (HVO) and sustainable aviation fuel (SAF).
• The company is a potential participant in the SAF pilot programme in Sarawak, which could drive further upside.

Earnings Revisions and Upgraded Valuation

• 2026/27 earnings were raised by 6% and 4% to RM44.6 million and RM46.3 million, respectively, reflecting higher gross margins in the refinery segment.
• Target price increased by 22% to S\$1.05, based on a revised 33x 2026F PE (up from 29x), supported by a 1x PEG and a projected three-year EPS CAGR of 33% (2023–26F).
• The valuation is now roughly two standard deviations above the one-year historical mean, indicating bullish sentiment and confidence in future growth.

Investment Catalysts and Risks

• Potential for higher-than-expected order wins and further gross margin improvements from increased economies of scale.
• Orderbook fulfillment and participation in new SAF projects offer additional earnings visibility and growth upside.

Cash Flow and Balance Sheet Highlights

Conclusion: Oiltek International – A High-Growth Renewable Energy Play for Investors

Oiltek International’s record-high 1H25 results, robust orderbook, and strategic positioning in the rapidly growing global oils, fats, and renewable energy markets make it an attractive investment. With a strong earnings outlook, improving dividend profile, and clear opportunities in sustainable fuels, Oiltek is primed for continued outperformance. Investors should watch for order wins, margin enhancements, and developments in the renewable energy segment as key catalysts for future upside.