Oiltek International Ltd: Executing Its Value-Up Strategy
CGS International Research | March 27, 2025
Oiltek International Ltd, a leading integrated process technology and renewable energy solutions provider, is making strategic moves to enhance shareholder returns and build a more sustainable business model. This comprehensive analysis delves into the company’s key initiatives and their potential impact on its future growth trajectory.
Aiming for Recurring Revenue Streams
Oiltek has been proactive in diversifying its revenue sources to offset the lumpiness of its customer orders. On February 24, 2025, the company entered into a heads of agreement (HOA) with PT Kilang Pertamina Internasional, an oil and natural gas refiner, to develop a Pre-Treatment Unit (PTU) and secure a sustainable supply of feedstock. This partnership aims to explore alternative feedstocks to replace Crude Palm Oil (CPO) and meet the growing demand for sustainable aviation fuel.
According to the International Air Transport Association (IATA), achieving net-zero carbon dioxide emissions by 2050 will require the construction of 3,000 to 6,500 new renewable fuel plants. Oiltek’s collaboration with PT Kilang Pertamina Internasional positions the company to capitalize on this significant market opportunity.
Seeking a Mainboard Listing
Oiltek has applied for a transfer from the Catalist board to the Mainboard of the Singapore Exchange (SGX). The company believes that a Mainboard listing would enhance its image both locally and globally, attracting more investors and potentially commanding a premium valuation compared to Catalist-listed companies. Oiltek also expects the move to improve the liquidity and performance of its shares, as well as help in recruiting top talent.
Proposed Bonus Issue
In a move to reward its loyal shareholders and broaden its investor base, Oiltek has proposed a 2-for-1 bonus issue. The company believes this will increase the accessibility of investing in Oiltek, encouraging trading liquidity and greater investor participation.
Reiteration of Add Rating
CGS International maintains its “Add” rating on Oiltek, with an unchanged target price of S$1.43. This target price represents a 14.4% premium to the sector average, reflecting Oiltek’s stronger 3-year earnings growth (9.1% vs. peers’ -17.2%) and higher projected return on equity (35.2% vs. peers’ 17.6%).
Key re-rating catalysts include further order wins and accretive mergers and acquisitions. Potential downside risks include order cancellations/delays, unfavorable foreign exchange movements, sudden spikes in raw material prices, and unanticipated disruptions in raw material supply.
Financial Snapshot
Metric Dec-23A Dec-24A Dec-25F Dec-26F Dec-27F
Revenue (RMm) 201.1 230.3 282.3 312.6 342.8
Operating EBITDA (RMm) 22.74 36.87 41.93 46.72 47.87
Net Profit (RMm) 19.12 29.64 33.14 36.78 37.65
Core EPS (RM) 0.13 0.21 0.23 0.26 0.26
Core EPS Growth 39.0% 55.0% 11.8% 11.0% 2.4%
FD Core P/E (x) 28.47 18.36 16.42 14.80 14.46
DPS (RM) 0.05 0.09 0.09 0.10 0.11
Dividend Yield 1.38% 2.42% 2.44% 2.70% 2.77%
