PhillipCapital analyst Paul Chew has maintained his “buy” call on Oiltek as its 3QFY2024 and 9MFY2024 ended Sept 30 results exceeded expectations. The company’s 3QYF2024 patmi spiked by 83.2% y-o-y to RM8.98 million ($2.7 million), bringing 9MFY2024 patmi to RM19.3 million.
Oiltek’s 9MFY2024 roundly beat Chew’s expectations as it stood at 83% of his full-year forecast. He notes that this was attributed to a combination of geographical mix and project timing, which boosted OIltek’s 9MFY2024 margins by 5 percentage points.
“The company continues to build upon its order books to a record level of RM401 million,” says Chew, noting that order momentum is rising in emerging countries after seeing underinvestments in capacity since the pandemic.
“The rebound in palm oil prices is stimulating new planting and demand for refining capacity outside the core markets of Indonesia and Malaysia,” he adds.
On the back of higher gross margins, Chew has increased his FY2024 earnings by 11% to RM25.8 million. The higher earnings estimate is also due to revised Singapore dollar (SGD)-Malaysian ringgit (MYR) assumptions of RM3.33 from RM3.45 previously.
Despite the earnings surge, Oiltek’s 9MFY2024 revenue stood below Chew’s expectations at 67% of his FY2024 forecast. As a result, the analyst has lowered his full-year revenue estimates by 10% to RM224.4 million.
See also: RHB still upbeat on ST Engineering but trims target price by 2.3%
He has also removed his valuation discount to Oiltek’s engineering peers. As such, Oiltek is now valued at 22 times P/E from 15 times previously due to the momentum in order book and earnings.
Following his positive sentiment, Chew has increased his target price estimates to $1.19 from 70 cents.
Since Nov 12, Oiltek’s shares surged by some 44.9% from around 69 cents to close at an all-time high of $1 on Nov 20.
