In its FY2025, Oiltek's revenue dropped by 8% y-o-y to RM211 million with the completion of several projects. Gross margin in the same year increased by 8.6 percentage points to 33%.
However, the company had to book a forex loss of RM8 million of which half has already been realised and the other half, not yet.
The company's cash is largely held in US dollars and bills in the greenback for contracts won outside Malaysia and in ringgit for domestic orders.
A reason for Tng to stay upbeat on Oiltek is that its order wins momentum has resumed, with RM37 million announced on Feb 11.
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The company, whose corporate office is at Shah Alam, is in the midst of a secondary listing on the Bursa.
"Oiltek believes this exercise will widen its investor base and potentially increase the liquidity of its shares and enhance its value through separate trading platforms," says Tng.
Following the results, Tng has cut his FY2026 and FY2027 earnings per share estimates by 15% to reflect lower revenue assumptions and also a bigger share base following a bonus issue.
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His new target price of 94 cents is still based on 2 sd above its four-year FY23-26F average PE multiple.
For Tng, key re-rating catalysts include further order wins and accretive M&As while downside risks include order cancellations/delays, unfavourable forex movements, sudden spike in raw material prices and unanticipated disruptions in raw material supply.
Oiltek International shares closed flat at 85 cents on March 16. It is up 129.73% in the past year.
