Velesto Energy $VELESTO / 5243 (VELESTO ENERGY BERHAD) Research by AffinHwang SELL (downgrade); Target Price: RM0.15
"Strong headline, but uncertain 2H risk lies"
Velesto Energy’s (Velesto) 1Q20 result missed our and consensus expectations. While there was a sharp jump in earnings, we believe this was partly due to some one-offs, one of which being inventory write-back. Risk lies with 4 out of 7 rigs due for renewal (Naga 2, 3 and 5 in May-20 and Naga 6 in August-20) from Petronas Carigali. Management did not provide a clear timeline on contract renewals;however, the base renewal rates are likely to be similar to current firm contracts. We cut our earnings to factor in weaker utilisation anddaily charter rates (DCR). Downgrade to Sell on the uncertain outlook, despite raising our target price to RM0.15 after rolling forward valuation
Stock: [VELESTO]: VELESTO ENERGY BERHAD
2020-05-21 11:26 | Report Abuse
Velesto Energy $VELESTO / 5243 (VELESTO ENERGY BERHAD)
Research by AffinHwang
SELL (downgrade); Target Price: RM0.15
"Strong headline, but uncertain 2H risk lies"
Velesto Energy’s (Velesto) 1Q20 result missed our and consensus expectations. While there was a sharp jump in earnings, we believe this was partly due to some one-offs, one of which being inventory write-back. Risk lies with 4 out of 7 rigs due for renewal (Naga 2, 3 and 5 in May-20 and Naga 6 in August-20) from Petronas Carigali.
Management did not provide a clear timeline on contract renewals;however, the base renewal rates are likely to be similar to current firm
contracts. We cut our earnings to factor in weaker utilisation anddaily charter rates (DCR). Downgrade to Sell on the uncertain outlook,
despite raising our target price to RM0.15 after rolling forward valuation