Velesto active, up 8.11% on positive technicals

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KUALA LUMPUR (Jan 10): Velesto Energy Bhd rose 8.11% in active trade at mid-morning today following a positive outlook on the stock.

At 10.07am, Velesto rose 1.5 sen with 15.23 million shares traded.

In a note today, Affin Hwang Capital Research said better job opportunities will likely fuel an earnings recovery for Velesto.

"Velesto Energy is a turnaround story in our oil and gas coverage, which we favour. We expect 4Q18 losses to narrow quarter-on-quarter on higher jack-up fleet utilisation. 2019E fleet utilisation is expected to improve post the 1Q19E monsoon season.

"Our turnaround story thesis hinges on the latest Petronas Activity Outlook that jack-up drilling rig demand is expected to double from 7-10 rigs in 2018 to 16-18 rigs in 2019, which should benefit Velesto, being the largest Malaysia jack-up operator.

"Post restructuring, Velesto has a clean balance sheet with 0.45x net gearing as of 3Q18. We have a 'buy' call on the stock, with a target price of 30 sen based on our DCF (discounted cash flow) valuation," it said.