KUALA LUMPUR (April 23): Hong Leong IB Research has maintained its “Hold” rating on Velesto Energy Bhd at 31 sen with a higher target price (TP) of 31 sen (from 25 sen) after Velesto secured four drilling contracts worth US$105 million for Naga 2, Naga 3, Naga 5 & Naga 6.

In a note today, the research house said that overall, it was  positive on the contract win as it improves the rig utilisation in 2H19 and is on track to management’s target of more than 80% for FY19 (vs FY18’s 73%).

“The average daily charter rate (DCR) of US$71,700/day is also 4% higher than average DCR of US$69,000/day achieved in FY18 as well as our FY19 DCR assumption of US$70,000/day.

“Therefore, we increased our FY19-20 earnings forecast by 90%-15% (amid a low base) respectively after imputing higher DCRs and utilisations.

“All in, maintain Hold recommendation on the stock with higher TP of 31 sen (from 25 sen) pegged to 0.9x FY19 PBV,” it said.