Broker: UOB Kay Hian
Date of Report: Tuesday, 15 July 2025

Oiltek International: Riding the Wave of Renewable Energy Growth – UOB Kay Hian Lifts Target Price to S\$0.80

Overview: Oiltek International Poised for Accelerated Growth

Oiltek International, a leading renewable energy equipment solutions provider, is positioned for significant upside in 2025 and beyond. With a robust market outlook, a sharp pivot towards recurring revenue streams, and strong momentum in order wins, the company is drawing increasing attention from investors. UOB Kay Hian maintains a BUY rating, raising the target price to S\$0.80—a substantial 65% increase from the previous target—driven by upgraded forecasts and improving market dynamics.

• Current Price: S\$0.67
• Target Price (12M): S\$0.80 (+19.4%)
• Market Cap: S\$287.4 million
• 52-Week High/Low: S\$0.705 / S\$0.143
• Major Shareholders: Koh Brothers Group (68.1%), Yong Khai Weng (6.4%)
• Bloomberg Ticker: OTEK SP

Key Takeaways from Management Meeting: Momentum Building

The latest discussions with Oiltek’s management reveal several pivotal developments:

• Order Wins Gaining Traction: Customers are finalizing orders as uncertainties surrounding US tariffs subside, paving the way for a near-term surge in contract signings.
• Recurring Revenue Expansion: Oiltek is actively transitioning toward a business model with a larger share of recurring revenues, particularly in high-demand sectors such as sustainable aviation fuel (SAF) and renewable energy feedstocks.
• Enhancing Shareholder Value: The company is exploring multiple avenues, such as a potential dual listing, bonus issues, increased dividends, and collaborations with strategic partners to drive shareholder returns and liquidity.

Competitive Edge: Technology, Innovation, and Business Model

Oiltek’s competitive strengths are underpinned by:

• Proprietary Technologies: Unique equipment designs boost productivity, functionality, and quality, setting the firm apart from largely European competitors.
• Rapid Innovation Cycle: Oiltek aims to introduce at least one new product design every six months, targeting emerging themes like biodiesel, SAF, and other renewable solutions.
• Asset-Light Structure: With a lean team of around 90 employees, the company maintains cost competitiveness, enabling it to bid aggressively and deliver superior margins.

Transition to Recurring Revenue: Strategic and Selective Expansion

Oiltek’s shift into manufacturing aims to establish recurring cash flows while focusing on high-margin, in-demand sectors. The approach is capital-light, with the company only reinvesting profits from plant construction and maintaining minority stakes, minimizing risk while maximizing return potential.

Initiatives to Boost Shareholder Value

To further unlock value, Oiltek is considering:

• Bonus share issues
• Enhanced dividend payouts
• Increased investor engagement
• Strategic partnerships or collaborations
• Potential dual listing to expand its investor base

These actions are expected to improve trading liquidity and drive further valuation upside.

Financial Performance and Outlook

Oiltek’s financials highlight its strong position and growth trajectory.

Orderbook and Growth Catalysts

Oiltek secured RM207 million in new orders in 2024, bringing its orderbook to RM355 million as of February 2025. The robust orderbook, near record highs, is expected to be fulfilled over the next 18–24 months, providing strong revenue visibility and underpinning future earnings growth.

Rising Importance of Sustainable Aviation Fuel (SAF)

The international aviation sector is targeting net zero CO₂ emissions by 2050, with SAF expected to contribute about 65% of the required reduction. Oiltek’s proprietary solutions for processing vegetable oil-based feedstocks for hydrotreated vegetable oil (HVO) position it to benefit directly from the global ramp-up in SAF production.

Favorable Industry Dynamics: Biodiesel and Vegetable Oil Demand

The global fats and oils market, valued at US\$257 billion in 2023 and projected to exceed US\$403 billion by 2033, is being driven by population growth and higher food demand. Oiltek stands out as a premier solutions provider for various vegetable oils, including palm, soybean, and rapeseed. Regulatory changes, such as Malaysia’s increase in biodiesel blending mandates from B10 to B20 and Indonesia’s move from B35 to B40, are set to drive further demand for Oiltek’s renewable energy solutions.

Valuation: Upgraded Multiples Reflecting Stronger Outlook

UOB Kay Hian has upgraded Oiltek’s target price to S\$0.80, based on a higher 27x 2026F PE (up from 20x), pegged at 0.9x PEG. This incorporates a 10% discount to 1.0x PEG, with the upward revision reflecting improved trading liquidity, good execution, and the potential for further re-rating on the back of more contract wins and expansion of the recurring revenue model.

• EPS CAGR (2023–2026F): 30%
• Valuation Multiple: 27x 2026F PE (1.5 SD above one-year mean)

Key Share Price Catalysts

• Higher-than-expected order wins
• Better-than-expected gross margins through economies of scale
• Potential dual listing and other corporate actions to enhance market liquidity

Profit & Loss, Balance Sheet, and Key Metrics Snapshot

Conclusion: Oiltek International – A Standout Play in Renewable Energy Equipment

Oiltek International emerges as a compelling investment opportunity in the renewable energy space, distinguished by its proprietary technology, asset-light model, and proactive shareholder engagement. With a surging orderbook, expansion into high-margin recurring revenue sectors, and favorable industry trends, Oiltek is well-positioned for sustained growth and further upside potential. Investors should closely monitor execution, order wins, and strategic corporate actions as key catalysts for share price appreciation.
Broker Coverage: UOB Kay Hian | Date: 15 July 2025