KUALA LUMPUR: Analyst remains optimistic that Deleum Bhd’s earnings will continue to be buoyed by high activity levels in second half (2H) of financial year ending December 31, 2018, driven by power and machinery (P&M) segment.
MIDF Research said this is despite Deleum’s six months 2018 earnings still failing to hit the halfway point of full year 2018 earnings forecasts.
"As previously guided, we have anticipated Deleum’s earnings upcycle to start in second quarter (Q2) 2018.
"Moving forward, we are optimistic that earnings will sustain into 2H 2018 as crude oil prices remain relatively stable, activity levels remain at a comfortable level and mobilisation cost for the Pan Malaysia maintenance, construction and modification (MCM) to stabilise,” it said in a note.
MIDF said theird quarter (Q3) and fourth quarter (Q4) are generally strong quarters for the company.
Deleum’s Q2 reported earnings grew by 36.9 per cent year-on-year to RM9.2 million.
P&M segment revenue and profit grew by 23 and 73 per cent respectively, mainly attributable to increase in work orders for exchange engines, retrofit projects, parts, repair and maintenance, valve and flows regulators and higher commission income earned.
MIDF said despite Deleum’s oilfield services segment revenue contracting by 1.6 per cent year-on-year, segment profit managed to grow by 4.5 per cent year-on-year to RM43.7 million, largely attributable to better sales mix with higher margin works executed and supported by lower financing costs.
While its integrated corrosion solution segment revenue more than doubled from a year earlier, the segment recorded a loss of RM18.2 million mainly due to higher costs incurred for the Pan Malaysia Painting and Blasting contracts and higher mobilisation costs for the MCM contract.
MIDF has upgraded Deleum to “buy” with an unchanged target price of RM1.39 a share.
“Given the upbeat earnings, optimistic outlook and current jobs at hand, we believe that the company will end the year well,” it said.