Company Coverage
Velesto Energy (VEB MK): 2Q26: Blips Reflected; Execution Remains Key For Stronger 2H26
BUY (Maintained)
Current price:
Target price:
Upside:
RM0.25
RM0.29
+16.0%
Analyst
Highlights
- 2Q26 core loss/weak EBITDA are temporary blips within expectation. 1H26 EBITDA, which met 40% of market forecasts, reflected downtrending
DCR and a low 56% utilisation in 2Q26. Note that this is based on a rig fleet of six since the Naga 3 (N3) disposal has been cancelled. The financials and outlook are very similar to global player Borr Drilling (trading at 14x EV/EBITDA)|
2H26 utilisation expecting to surge to >85%. While N3 will remain idle until mid 4Q26 at best, we see VEB’s unique track record again appeals to
regional oil majors seeking domestic rig security demand, as evidenced by the remaining five rigs being almost fully contracted for 2H26. This is superioreven to Borr’s 2H26 contract coverage of 70%. Hence, we make no changes to forecasts, expecting a stronger 2H26 showing that will also support more generous dividend payments. Maintain BUY, and target price of RM0.29 (7x EV/EBITDA; 10% normalised yield).
Analysis
- 2Q26 core loss and EBITDA – A temporary blip well within expectations. Velesto Energy’s (VEB) share price downtrend since Jun 26, especially after the announcement of the Naga 3 (N3) sale cancellation, has adequately factored in the weak 2Q26 showing. 2Q26’s utilisation of 56% (66% if based on a rig fleet of five excluding N3) is within our earlier expectation of 60%. This included a one-month zero-rated period for Naga 2 (N2), two idle months for Naga 4 (N4), and full quarter of idle periods for N3 and Naga 6 (N6). Average realised daily charter rate (DCR) trended 20% lower yoy but is close to US$96,000 in the region. VEB’s 0.25 sen interim DPS makes up RM0.01 DPS for 1H26 vs our RM0.046 forecast.
Highlights
- 2Q26 core loss/weak EBITDA are temporary blips within expectation. 1H26 EBITDA, which met 40% of market forecasts, reflected downtrending
DCR and a low 56% utilisation in 2Q26. Note that this is based on a rig fleet of six since the Naga 3 (N3) disposal has been cancelled. The financials and outlook are very similar to global player Borr Drilling (trading at 14x EV/EBITDA)|
2H26 utilisation expecting to surge to >85%. While N3 will remain idle until mid 4Q26 at best, we see VEB’s unique track record again appeals to
regional oil majors seeking domestic rig security demand, as evidenced by the remaining five rigs being almost fully contracted for 2H26. This is superioreven to Borr’s 2H26 contract coverage of 70%. Hence, we make no changes to forecasts, expecting a stronger 2H26 showing that will also support more generous dividend payments. Maintain BUY, and target price of RM0.29 (7x EV/EBITDA; 10% normalised yield).
Analysis
- 2Q26 core loss and EBITDA – A temporary blip well within expectations. Velesto Energy’s (VEB) share price downtrend since Jun 26, especially after the announcement of the Naga 3 (N3) sale cancellation, has adequately factored in the weak 2Q26 showing. 2Q26’s utilisation of 56% (66% if based on a rig fleet of five excluding N3) is within our earlier expectation of 60%. This included a one-month zero-rated period for Naga 2 (N2), two idle months for Naga 4 (N4), and full quarter of idle periods for N3 and Naga 6 (N6). Average realised daily charter rate (DCR) trended 20% lower yoy but is close to US$96,000 in the region. VEB’s 0.25 sen interim DPS makes up RM0.01 DPS for 1H26 vs our RM0.046 forecast.
BUY (Maintained)
Current price:
Target price:
Upside:
RM0.25
RM0.29
+16.0%
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
