The contract, to provide slickline equipment and services to EMEP, was awarded to wholly-owned subsidiary Deleum Oilfield Services Sdn Bhd and commenced on March 15, the group said in a Bursa Malaysia filing yesterday.
“While we expect the contract to contribute positively to Deleum’s financial performance moving forward, we make no changes to our earnings estimates in this early stage of the contract, pending its Q1 FY2023 results in May,” MIDF Research said in a note today.
The research house said key risks to the contract include execution risks and unforeseen changes in politics, the economy and regulations.
Nevertheless, in consideration of Deleum’s experience and expertise in the services requested, MIDF believes the risks can be mitigated.
“The contract value was not stated. However, Deleum had previously won a similar contract from EMEP in 2018,” it added.
At the time, Deleum mentioned the value of the contract depended on agreed rates and work orders issued by EMEP during the contract tenure.
MIDF has maintained its “buy” call on Deleum, with a target price of RM1.22.
A contrarian view
AmInvestment Bank Bhd (AmInvest) was neutral on the impact of the contract, although it maintained a “buy” with an unchanged fair value of RM1.26 per share.
Analyst Lucas Tan told FMT Business that the ExxonMobil contract earnings were estimated to have “an insignificant impact”, hence no changes were made to the call.
In a recent note, AmInvest noted that the group’s slickline operations, which contributed 16% of FY2022 revenue, continued to chart resilient performance with close to full utilisation.
“Despite the commendable utilisation rate, the oilfield services (OFS) segment barely broke even in FY2022 on higher operating expenses,” it said.
“In addition, the group also has a number of acquisitions in the pipeline to further spur earnings growth.”
AmInvest gathers that Deleum is in the midst of finalising deals to acquire three oil and gas services companies over the next couple of months.
Deleum posted a net profit of RM42.1 million for FY2022, up 147% from FY2021. Net profit for the quarter was RM13.7 million, up 30.5% from the same quarter last year.
“The improved results were mainly due to better operating margins achieved across all three segments, coupled with reversal of impairment made on trade receivables, gain on disposal of plant and equipment and lower other operating expenses incurred,” it said.
The group’s main segments include power and machinery, oilfield services and integrated corrosion solutions.
At 3.40pm, Deleum’s share price was up 0.53% or 0.5 sen at 94 sen, giving it a market capitalisation of RM375.43 million.