Oiltek International: Multiple Positive Catalysts Fuel Valuation Re-Rating

UOB Kay Hian | 27 March 2025

Oiltek International (OTEK SP) has announced several positive developments in 2025 that could drive a valuation re-rating for the company. These include:

Transfer to SGX Mainboard to Enhance Image and Investor Base

Oiltek has submitted an application to transfer its listing from the Catalist Board to the Mainboard of the Singapore Exchange. This move could enhance the company’s image and provide it with a wider platform and greater opportunities for future fundraising. It would also give Oiltek access to a larger and more diverse investor market, including institutional and overseas investors.

Proposed 2-for-1 Bonus Shares Issue to Boost Liquidity

Oiltek has proposed a 2-for-1 bonus share issue, which would increase the number of shares from 143 million to 429 million. This could improve the accessibility of investing in Oiltek for more investors, encouraging trading liquidity and broader shareholder participation.

Partnership with Pertamina to Develop Sustainable Aviation Fuel (SAF)

Oiltek has announced a head of agreement with Indonesian state-owned oil and gas company Pertamina to explore the development of a Pre-Treatment Unit (PTU) and the supply of feedstock for SAF and hydrotreated vegetable oils (HVO) production. This partnership could provide Oiltek with construction revenue, ownership of the plant, and a recurring revenue stream from supplying the PTU’s palm oil effluent feedstock.

Robust Order Book and Positive Industry Outlook

Oiltek’s order book remains near a record high at RM355 million as of February 2025, providing strong visibility on future revenue. The company is also well-positioned to benefit from the growing demand for renewable energy solutions, driven by factors such as:
The international aviation industry’s goal to reach net zero CO2 emissions by 2050, which will require increased SAF production.
Rising global demand for both edible and non-edible vegetable oils.
Higher biodiesel blending requirements in Malaysia and Indonesia.

Valuation and Recommendation

Analysts at UOB Kay Hian maintain a BUY recommendation on Oiltek International, with a revised target price of S\$1.44 (previously S\$1.37). This is based on a slightly higher 20x 2025 price-to-earnings (PE) ratio, pegged to a 0.8x price-to-earnings growth (PEG) ratio. The higher target price reflects the potential positive impact of the company’s recent corporate actions and the expectation of further improvement in trading liquidity and investor base.
Key share price catalysts include higher-than-expected order wins and better-than-expected gross margins from economies of scale.