Company Coverage
Oiltek International (OTEK SP) : Strong Growth Pipeline; Project Execution Remains In Focus
BUY (Maintained)
Current price:
Target price:
Upside:
S$1.60
S$2.78
+73.8%
Analyst
Highlights
- We hosted Oiltek recently, and management provided updates on its operations and expansion strategy.
- Oiltek continues to pursue growth through a strong pipeline of SAF projects, JVs and new ventures. In addition, the HOA announced in Apr 26 is progressing well.
- Maintain BUY with an unchanged target price of S$2.78, pegged to 28x 2027F PE. We believe contract wins and delivery of better earnings could continue to support its re-rating potential.
Analysis
- Key takeaways from SG Small & Mid Cap Corporate Day. We hosted Oiltek International (Oiltek) recently at our SG Small & Mid Cap Corporate Day, where management provided updates on its dividend policy and expansion strategy across existing and new markets. Key topics covered included the group's algae farming trial, feedstock business segment, and sustainable aviation fuel (SAF) project pipeline in Sabah and other markets. A summary of the key questions raised can be found on the following page.
- Strong SAF order pipeline and potential corporate actions. Oiltek is pursuing more SAF opportunities and is targeting orders that could be worth several billion in ringgit terms, supported by a broader tender book of three potential contracts over the next 12 months. Separately, the heads of agreement (HOA) announced in Apr 26 is progressing well for land purchase, licensing and funding drawdown, with the land offer letter expected by end-26. Looking ahead, Oiltek has two corporate actions in the pipeline, a Bursa secondary listing and a spinoff of its JV.
- Growth strategy and new initiatives. Oiltek's strategy is two pronged. It is expanding into existing and new markets while shifting focus toward larger scale projects and separately building recurring income through JVs structured on a low-capex, high-return basis - an asset-light approach that diversifies earnings. Beyond this, the group is exploring new growth avenues, including an algae farming trial (currently focused on HEFA, given its proven technology and low-cost profile) and a feedstock business that is still in the trial stage, alongside another expansion initiative yet to be disclosed.
Highlights
- We hosted Oiltek recently, and management provided updates on its operations and expansion strategy.
- Oiltek continues to pursue growth through a strong pipeline of SAF projects, JVs and new ventures. In addition, the HOA announced in Apr 26 is progressing well.
- Maintain BUY with an unchanged target price of S$2.78, pegged to 28x 2027F PE. We believe contract wins and delivery of better earnings could continue to support its re-rating potential.
Analysis
- Key takeaways from SG Small & Mid Cap Corporate Day. We hosted Oiltek International (Oiltek) recently at our SG Small & Mid Cap Corporate Day, where management provided updates on its dividend policy and expansion strategy across existing and new markets. Key topics covered included the group's algae farming trial, feedstock business segment, and sustainable aviation fuel (SAF) project pipeline in Sabah and other markets. A summary of the key questions raised can be found on the following page.
- Strong SAF order pipeline and potential corporate actions. Oiltek is pursuing more SAF opportunities and is targeting orders that could be worth several billion in ringgit terms, supported by a broader tender book of three potential contracts over the next 12 months. Separately, the heads of agreement (HOA) announced in Apr 26 is progressing well for land purchase, licensing and funding drawdown, with the land offer letter expected by end-26. Looking ahead, Oiltek has two corporate actions in the pipeline, a Bursa secondary listing and a spinoff of its JV.
- Growth strategy and new initiatives. Oiltek's strategy is two pronged. It is expanding into existing and new markets while shifting focus toward larger scale projects and separately building recurring income through JVs structured on a low-capex, high-return basis - an asset-light approach that diversifies earnings. Beyond this, the group is exploring new growth avenues, including an algae farming trial (currently focused on HEFA, given its proven technology and low-cost profile) and a feedstock business that is still in the trial stage, alongside another expansion initiative yet to be disclosed.
BUY (Maintained)
Current price:
Target price:
Upside:
S$1.60
S$2.78
+73.8%
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at the following link: https://research-api.uobkayhian.com/assets/disclaimer/df64a6ea-7980-447c-ae9e-fd19b93257dc, 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.
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