Hong Leong Investment Bank Bhd (HLIB) maintained its HOLD call on Velesto Energy Bhd with a target price of RM0.28, saying the company’s rig utilisation is likely to recover as more rigs return to operations, although softer day rates and rising rig availability could limit near-term upside.
Velesto recorded a core net loss of RM2.2 million in 2QFY26, compared with a core net profit of RM25.9 million in the previous quarter and RM19.5 million a year earlier. This brought 1HFY26 core net profit down 67% year-on-year to RM23.7 million, below HLIB’s and consensus expectations.
HLIB attributed the weaker performance mainly to rig utilisation falling to 66% from 90% in 1QFY26. Naga 4 underwent upgrade works ahead of operations in Phu Quoc while Naga 2 underwent certification works before starting a five-year contract with Petronas. Naga 6 also remained idle ahead of its relocation to Thailand, with operations expected to begin in 3QFY26.
The research house expects utilisation to improve as these rigs resume operations but warned that increasing rig availability could put pressure on day rates, which fell to US$103,000 per day from US$108,000 previously.
Velesto’s orderbook stood at RM1.1 billion, supported by RM3.1 billion in prospects, providing earnings visibility despite industry headwinds. HLIB cut its FY26 earnings forecast by 10.5% but left FY27 and FY28 estimates unchanged.
HLIB said the company’s net cash position and an expected FY27 dividend yield of around 12% remain supportive, although much of the positive catalysts may already be reflected in its share price.
As of 11.04 am, the stock price is flat at RM0.25.
