Velesto bounces back after last week’s share price collapse

Company may see a turnaround later this year after getting higher charter rates for its Petronas contract.

PETALING JAYA: Oil and gas services provider Velesto Energy Bhd’s stock price has rebounded after plummeting 32% last Tuesday following its announcement it suffered a RM100.4 million net loss for FY2022.

Since then, its share price had clawed back almost 30% to 24.5 sen at 3.35pm today, from the low of 19 sen following its 4th quarter results announcement (Q4 FY2022).

Last week’s trauma seems to have worn off with the counter being the second most actively traded stock of the day with 124.33 million shares changing hands as of 4.15pm.

Last Monday, Velesto announced it suffered a net loss of RM26 million for Q4 FY2022 from a net profit of RM5.43 million a year ago, as the bottom line was hit by higher operating expenses, finance costs and taxation.

For the full year, its net loss widened to RM100.4 million from a net loss of RM90.82 million in FY2021.

Turnaround on the cards?

However, a favorable development in its revised charter rates and contracts secured is expected to bolster Velesto’s earnings from the second quarter of 2023.

In a research note, Affin Hwang Capital said Velesto has successfully negotiated higher charter rates for the remaining tenure of its Petronas contract. This umbrella contract will help cushion expected operational expenditure cost increases.

Velesto said operating costs would be 10-15% higher than expected in 2023 arising from material and corporate costs.

“These (higher charter rates) will be progressively reflected from the second quarter (Q2) of 2023 onwards,” said Affin Hwang Capital, which raised its 2023 earnings per share (EPS) by 10% but lowered the 2024–25 EPS by 7%.

Affin Hwang added that based on current firm contracts, Q1 2023 rig utilisation averages around 86% and this will fall to 81% in Q2 2023.

Q3 2023 utilisation is reported to be even lower at 53%, with a few work programmes under negotiations with Petronas.

However, it said Q4 2023 is expected to be “perfect” as barring any unforeseen operational hiccups and clients drilling programme delay, it is on track to record 100% utilisation.

As it stands Velesto has secured 80% rig utilisation for 2023, higher than the 62% it recorded the previous year.

The stock was up 3 sen or 13.95% to 24 sen at 4.36pm today, giving the company a market capitalisation of RM1.93 billion.