UOB Kay Hian Research Report March 27, 2025
“Multiple Positive Catalysts Propel Oiltek International to New Heights”
Oiltek International (OTEK SP): Multiple Positive Catalysts For Valuation Re-rating
Transfer of Listing to SGX Mainboard to Enhance Image and Investor Base
Oiltek International (Oiltek) has announced that it has submitted an application to transfer its listing from the Catalist Board to the Mainboard of the Singapore Exchange. This move is expected to enhance Oiltek’s image and provide it with a wider platform and greater opportunities for future fund raising. It will also give the company access to a larger and more diverse investor market, including institutional and overseas investors.
Proposed 2-for-1 Bonus Shares Issue to Boost Trading Liquidity
Oiltek has also proposed a 2-for-1 bonus shares issue, which will increase the number of shares from 143 million to 429 million. This move is aimed at improving the accessibility of investing in Oiltek to more investors, thereby encouraging trading liquidity and greater participation by investors, as well as broadening the shareholder base.
Partnership with Pertamina to Explore Alternative Feedstocks for Sustainable Aviation Fuel
Oiltek has announced a head of agreement with Pertamina to engage in a partnership and transaction in relation to the development of a Pre-Treatment Unit (PTU) and the supply of feedstock for the PTU. This partnership aims to explore alternative feedstocks to replace crude palm oil so that sustainable aviation fuel (SAF) and hydrotreated vegetable oils (HVO) products can meet the growing demand of the export market. This is a positive development as it enables Oiltek to generate revenue from construction, ownership of the plant, and supply of feedstock.
Strong Orderbook and Favorable Industry Trends
Oiltek secured RM207 million in new orders in 2024, bringing its orderbook to RM355 million as of February 2025. This is expected to be fulfilled in the next 18 to 24 months. Furthermore, the international aviation industry’s goal to reach net zero CO2 emissions by 2050 is expected to drive increased demand for SAF, which could contribute around 65% of the reduction in emissions needed by aviation. This bodes well for Oiltek, as it is a solutions provider for all vegetable oils used in HVO production.
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation on Oiltek International with a higher target price of S\$1.44, based on a slightly higher 20x 2025F PE. The analysts believe the multiple positive catalysts, including the transfer of listing, bonus shares issue, and the Pertamina partnership, could lead to a further re-rating of the stock.
