Nicholas Yon of Lim & Tan has reiterated his "buy" call on Oiltek International , following higher-than-expected 2HFY2024 earnings that grew by 57.8% y-o-y to RM19.4 million.
With expectations of better earnings growth ahead, he has raised his target price from $1.21 to $1.50, which is based on 20x FY2025 earnings.
"The upward revision reflects stronger profitability that will be driven by the continued execution of its existing order book," states Yon in his Feb 17 note.
His current estimates, however, has yet to factor in future project wins while making slight upward adjustments to gross margins, aligning them closer to but still
below 2HFY24 levels.
"We appreciate that management continues to provide critical insights into its outlook while maintaining confidence in the long-term growth of the business," says Yon.
As at end of FY2024, the company's order book has reached RM354.9 million and Yon is optimistic that the company can sustain this momentum.
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"This increased visibility should serve as a key catalyst for share price performance heading into FY2025," says Yon.
In line with higher earnings, the company plans to pay a higher dividend of 2.7 cents for the whole of FY2024, which gives a yield of 2.4%.
Assuming the payout ratio is held steady at 43%, Yon says that shareholders can look forward to a higher payout given the expected earnings growth.
Oiltek has called for a trading halt of its shares with effect from 10.47 am.
It was up 1.71% to $1.19 prior to this.
