• Oiltek International is a Malaysia-based process-engineering specialist that designs and builds plants for the global vegetable-oils industry. • The company has also been one of the SGX’s standout performers. • That deal later attracted scrutiny over BioSeaga’s Brunei links and financial standing. Oiltek clarified that BioSeaga is a newly formed Malaysian special-purpose vehicle and that preliminary corporate, sanctions, insolvency and anti-money-laundering checks uncovered no adverse issues. • Oiltek’s growth prospects remain attractive, but future upside increasingly depends on converting ambitious SAF proposals into binding, bankable projects.
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Excerpts from UOB Kay Hian report
Analyst: Tang Kai Jie
Oiltek International (OTEK SP)
Highlights
• 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. |
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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 end26.
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.
| Stock Impact |
• Oiltek briefing Q&A summary. Investors' questions centred on the progress and monetisation timeline of Oiltek's newer growth initiatives.
| - Algae farming remains at a semi pilot stage, currently at a half-acre pond size, with harvesting challenges and negative feedback from larger organisations. Management is unable to predict when this will meaningfully impact the market. - Regarding the SAF projects in Sabah, management is in talks for two smaller sized contracts (100 tonnes and 300 tonnes p.a.), alongside three other potential contracts at the tender stage over the next 12 months. - For the HOA timeline announced in April, the process requires nine months in total, comprising six months plus a further three months to finalise land purchase, licensing and funding drawdown. |
Management flagged the timeline may be slightly behind schedule. - Dividend policy remains at 40-50% of net profit, supported by a net cash position above RM100m over the past few years.
• Building a major SAF facility in Sabah. Earlier this year, Oiltek entered into a RM1.4b HOA with Bioseaga Industries Sdn Bhd (Bioseaga) for the construction services of a SAF production facility with a planned capacity of approximately 300 metric tonnes per day in Sabah, Malaysia.
Henry Yong, CEO of Oiltek.Oiltek acts as the exclusive contractor for the project and will undertake the engineering, procurement, construction and commissioning (EPCC) for the plant’s pretreatment facilities, SAF production plant, tank farm and logistic bulking infrastructure, and partial blending facilities.
Oiltek also provides the preliminary necessary technical expertise and data reasonably required by Bioseaga and its advisor for financial modelling and project planning.
• Right to participate in equity ownership enables significant future recurring estimated earnings of RM14m-28m. This project enables Oiltek the right of first refusal to participate in any equity investment, JV, or ownership opportunity related to the project.
We estimate that a 10% stake in the plant could generate around RM14m-28m of recurring earnings p.a., based on 10- 20% ROI of the plant’s RM1.4b construction value.
This is a significant sum, equivalent to 45-90% of Oiltek’s 2025 earnings.
• Maintain BUY with unchanged target price of S$2.78, pegged to a 28x 2027F PE (+1SD above historical PE mean).  Tang Kai Jie, analystWe believe a strong contract win and delivery of better earnings could continue to support a re-rating. Our valuation base year of 2027 also better captures the significant earnings uplift from the recently secured RM1.4bn Bioseaga SAF project. • Oiltek is currently trading at only 17x 2027F PE, around 25% discount vs the tech manufacturers in Singapore and Malaysia, despite having more a superior: a) business model that is asset-light in nature, b) EPS growth, c) ROE (>30%), and d) net margin (>15%). |
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