Oiltek International: A Deep Dive into Financial Strength and Growth Opportunities

Oiltek International Ltd, a Singapore-based company specializing in integrated process technology and renewable energy solutions, has demonstrated robust growth in recent years. Despite FY24 revenue falling marginally short of forecasts (2.4% below CGS International’s forecast and 0.3% below Bloomberg consensus), its FY24 net profit exceeded expectations by 4.4% and 14.0% above CGS International’s and Bloomberg’s estimates, respectively. The company’s FY24 revenue stood at RM230.3m, marking a 14.5% year-on-year increase, while net profit surged by 55.0% to RM29.6m.

Oiltek’s strong gross margins, which improved by 4.4 percentage points due to increased contributions from the Americas and Africa, have been pivotal in driving profitability. The declared final dividend per share (DPS) of 1.8 Scts, along with an interim DPS of 0.9 Scts, brought the total FY24 DPS to 2.7 Scts, representing approximately 44.4% of its net profit.

Optimistic Outlook Supported by a Robust Order Book

With an order book valued at RM354.9m as of February 12, 2025, Oiltek is well-positioned for continued growth over the next 18-24 months. FY24 saw the company secure new orders worth RM207.0m, with promising opportunities in edible and non-edible oil refinery solutions. The growing global demand for vegetable oils, namely palm oil, soybean oil, and rapeseed oil, coupled with a focus on environmental sustainability, has bolstered Oiltek’s renewable energy segment. Key developments include Indonesia’s planned increase in biodiesel blending mandates to 40% in 2025 and Malaysia’s target of 30% blending by 2030.

Valuation and Recommendation

CGS International maintains an “Add” rating for Oiltek, with a target price of S\$1.43, representing a 16.3% upside from the current price of S\$1.23. The valuation is based on a peer sector average FY26F price-to-earnings ratio (P/E) of 18.3x. Potential catalysts for re-rating include further order wins in biodiesel and sustainable aviation fuel (SAF), as well as accretive mergers and acquisitions (M&A). Risks include order cancellations, forex fluctuations, raw material price spikes, and supply chain disruptions.

Peer Comparison: BM GreenTech Bhd

BM GreenTech Bhd, categorized as “Not Rated” (NR) by CGS International, is another key player in the renewable energy space. The company has a market capitalization of US\$295m and trades at a CY25F P/E of 23.5x. However, its three-year earnings per share (EPS) compound annual growth rate (CAGR) is projected at -32.4%, signaling potential challenges. BM GreenTech’s recurring return on equity (ROE) is 13.9%, and its dividend yield stands at 1.1%, making it a less attractive option compared to Oiltek.

Samaiden Group Bhd: Renewable Energy Prospects

Samaiden Group Bhd, also classified as NR, has a market cap of US\$119m. Trading at CY25F and CY26F P/E multiples of 20.8x and 17.9x respectively, Samaiden faces a three-year EPS CAGR of -7.4%. Its recurring ROE is 15.8%, and its dividend yield is 1.1%. Although Samaiden shows promise in the renewable energy sector, its slower growth trajectory compared to Oiltek limits its attractiveness to investors.

Kelington Group Bhd: An Established Industry Player

Kelington Group Bhd, with a market cap of US\$555m, is another notable competitor. It trades at CY25F and CY26F P/E multiples of 17.5x and 15.3x, respectively. While its recurring ROE is an impressive 29.2%, and its dividend yield is 1.9%, Kelington’s valuation metrics align closely with Oiltek’s, making it a strong peer. However, Oiltek’s focus on integrated renewable energy solutions and its superior growth potential give it a slight edge in the agribusiness sector.

Environmental, Social, and Governance (ESG) Commitments

Oiltek International’s ESG initiatives underscore its commitment to sustainability and innovation. The company’s flagship processes convert waste into biofuels, supporting decarbonization efforts by diverting waste from landfills and reducing methane emissions. Oiltek also adheres to fair labor practices, with 60% of its senior management and 41% of managers aged over 50, demonstrating its commitment to diversity and inclusion.