KUALA LUMPUR (July 13): CGS-CIMB Securities has maintained its “Add” rating on Velesto Energy Bhd at 23.5 sen with an unchanged target price (TP) of 25 sen, and said the FY2024F outlook for Velesto may be stronger than current house forecasts if Velesto obtains the recent strong daily charter rates (DCR) achieved by its peers in the region.

In a note on Wednesday (July 12), the research house however said near-term outlook for 2Q2023F and 3Q2023F are mixed, as the effect of higher DCRs would be diluted by sharp sequential falls in utilisation rates.

“Reiterate Add, with a DCF-based TP of 25 sen; we expect Velesto’s 4Q2023F to see a strong V-shaped recovery, with even more rate upside for FY2024F.

“Our forecasts incorporate new jobs for Velesto at only US$120,000/day for FY2024-2025F, US$110,000/day for FY2026-2028F, and US$80,000/day thereafter.

“A key re-rating catalyst is if Velesto secures US$130,000/day DCR for FY2025-2028F, which would lift our TP to 30 sen. Key downside risk is if opex (operating expenditure) inflation continues unabated,” it said.