"The proposed listing is expected to diversify Oiltek’s investor base, increase trading liquidity and provide greater flexibility for future capital-raising initiatives," states Cheong in his July 22 note.
Just on July 15, Cheong raised his target price for this counter from 48 cents to 80 cents. In his July 22 note, Cheong figures the stock is now worth 86 cents.
Oiltek is already trading at a premium of 40% based on FY2026 earnings versus its Malaysia-listed peers but its valuation multiple could continue to re-rate upwards.
According to Cheong, this is because of Oiltek's "moats" including several proprietary technologies in equipment design that could enhance the functions, productivity and quality of its equipment.
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Oiltek is constantly innovating with a target to introduce at least one new product design every six months
The company operates on an asset-light and lean business model with a headcount of just around 90 that enables Oiltek to be very cost competitive vs its competitors especially the Europeans, says Cheong.
Oiltek is now in talks with the Sarawak government on a potential sustainable aviation fuel plant in the state, which underscores the industry’s recognition of its technical capabilities in renewable energy processing.
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"If progressed, the programme could offer Oiltek a meaningful foothold in the fast-growing SAF sector," says Cheong.
As of Apr 16, Oiltek holds an orderbook of around RM402 million, an increase from RM355 million as of Feb 12, to be fulfilled over the next 18 to 24 months.
The new orders span the design and delivery of process plants such as soapstock acidulation, dry fractionation, and physical refining, as well as storage tank installation, biogas plant upgrades, and biodiesel consultancy.
These projects are expected to contribute positively to Oiltek’s FY2025 performance.
With the Bursa listing seen to improve trading liquidity and supporting a re-rating, Cheong maintains his "buy" call but values the company at 29x FY2026 earnings, up from an earlier valuation multiple of 27x, thereby deriving his higher target price of 86 cents, up from 80 cents.
Oiltek shares gained 6% to trade at 80 cents as at 10.38am.
