THE CONTEXT

• To little investor interest, Oiltek listed on SGX in March 2022 at 23 cents /share.

Its stock price languished over months and then into early 2024.

Its sterling FY23 results triggered investor interest and, voila, the stock's up 157% year-to-date, from 22 cents to 56.5 cents.

• In June, finally, one broker -- Phillip Securities -- launched an initiation report of Oiltek. Today, it put out its second report. 

The Malaysian-based company's orderbook and profitability have done nicely in recent years.


Oiltek orderbk 6.24Orderbook forecasts for FY24 and FY25 by Phillip Securities.

• Oiltek (current market cap: S$81 million) has a 68% shareholder -- Koh Brothers Eco Engineering, a listco on the Singapore Exchange -- which may be why trading liquidity is typically tight

• Oiltek's business is one-of-a-kind on the SGX: It provides turnkey solutions for refineries and processing plants in the vegetable oils industry.

• While it has customers all over the world (including Wilmar, Sime Darby and Sinar Mas), Indonesia's players in the palm oil supply chain accounted for 78% of its FY23 revenue. 

This time, it reported a large contract from Colombia in Latin America.

For more, see excerpts of Phillip Securities report below...
 



Excerpts from Phillip Securities' report
Analyst: Paul Chew

▪ Oiltek announced a RM45.5mn contract in Latin America.

This brings the total number of contracts secured this year to RM197.8mn and a record outstanding order book of RM400.9mn, or two years of FY23 revenue. The project involves refining palm and soybean oil.

▪ We believe the current wave of orders includes more turnkey projects and an investment cycle underway in Latin America.

Colombia is the 4th largest palm oil producer in the world. The 22% growth in production has raised the demand for downstream capacity.

▪ We maintain our BUY recommendation and FY24e earnings.

The target price of S$0.70 is unchanged and pegged to 15x PE FY24e.


Oiltek CEO profit6.24



The growth in palm oil production in Latin America is driving a surge in downstream capacity.

Oiltek
Share price: 56.5 c Target:
70 c

Oiltek is a global leader in palm oil process technology, including refining, fractionation, and phytonutrient extraction.

The new area of growth is renewable energy.

The expected spike in sustainable aviation fuel production from 1.5mn tonnes in 2024 to potentially 51mn by 2030 is another opportunity.



Highlights

Compounding of the order book. Oiltek's order book has compounded at an annual rate of 51% over the past four years, from 2019 to 2023.

Our year-end target for the order book is unchanged at RM491mn.

New orders secured this year are RM197.8mn, still below the record RM322.1mn in 2023.

 

Stock price 

56.5 c

52-week range

20 – 57 cts

Market cap

S$81 m

PE (trailing)

11.3

Dividend yield (trailing)

4.46%

1-year return

157%

Shares outstanding

143 m

Source: Yahoo!

New opportunities in Latin America. Colombia is the 4th largest producer of palm oil globally.

After a lull during the pandemic, production has returned to growth with a 22% rise to 1.9mn MT over the past 3 years.

The jump in production will require more downstream processing capacity.

The global market share of Colombia’s production remains tiny at around 2%.

However, there is huge potential.

According to Fedepalma, the government has identified 5mn ha of land (Malaysia: ~3.3mn ha) suitable for palm without the need for deforestation.




Full report here.

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