Oiltek International: Multiple Positive Catalysts Driving Valuation Re-Rating
UOB Kay Hian | 27 March 2025
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 (SGX). This move is expected to enhance Oiltek’s corporate image and provide it with a wider platform and greater opportunities for future fundraising. 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 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 corporate action 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 Sustainable Aviation Fuel
Oiltek has announced a head of agreement with Pertamina, the state-owned oil and gas company of Indonesia, to explore a partnership in 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 partnership is a positive development for Oiltek as it enables the company to generate revenue from:
Construction revenue in the initial stage of the project
Ownership of a substantial stake in the completed plant
Supply of PTU’s palm oil effluent feedstock
The construction revenue of this project is expected to start contributing in 2026, while the plant should start contributing from 2027 onwards.
Strong Orderbook and Positive Industry Outlook
Oiltek secured RM207 million in new orders in 2024, bringing its orderbook to RM355 million as of 12 February 2025. This orderbook is expected to be fulfilled in the next 18 to 24 months.
The international aviation industry has set a goal to reach net zero CO2 emissions by 2050, which will require an increase in SAF production. As Oiltek has solutions to treat vegetable oil-based raw materials as feedstock in HVO production, the growing demand for SAF could lead to more contract wins for the company in the future.
Furthermore, higher biodiesel blending requirements in Malaysia and Indonesia are expected to boost demand for biodiesel and drive growth in Oiltek’s renewable energy segment.
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation on Oiltek with a higher target price of S\$1.44 (previously S\$1.37), based on a slightly higher 20x 2025 price-to-earnings (PE) ratio (from 19x), pegged to 0.8x price-to-earnings growth (PEG) ratio.
The research team believes that the corporate actions, such as the transfer of listing and bonus shares issue, could improve trading liquidity and enhance Oiltek’s investor base, leading to a better price discovery for the stock. Good project execution and more contract wins could also lead to a further re-rating of the stock.
Key Catalysts and Risks
Potential catalysts for Oiltek’s share price include higher-than-expected order wins and better-than-expected gross margins from better economies of scale.
Risks to the investment thesis include lower-than-expected order wins and project execution challenges.
