KUALA LUMPUR (July 3): Hong Leong Investment Bank (HLIB) has advocated investors buy Velesto Energy Bhd (KL:VELESTO) on weakness, in anticipation of strong earnings in the coming quarters amid persistent jack-up (JU) rig crunch in Southeast Asia.

In a technical tracker note on Wednesday, the research house said that for the second quarter of financial year 2024 (2QFY2024), it expects Velesto’s JU rig utilisation to remain above 90%, with full-year utilisation projected at 85%, slightly higher than FY2023’s 83%.

“Additionally, the renewal of the umbrella contract with Petronas Carigali, featuring a higher daily charter rate of approximately US$140,000 (RM660,766) — up from US$100,000 — will contribute positively to Velesto’s earnings from 2Q2024 (second quarter of 2024) onwards.

“We project Velesto’s earnings to surge 89% in FY2024, with an additional 9.6% increase in FY2025.

“All in, we maintain a 'buy' call on Velesto, with a target price of 35 sen,” it said.

HLIB said that technically, Velesto is trading near its long-term support region of 25 sen to 27 sen with indicators showing uptick bias.

“A successful breakout above 28.5 sen will signal a new uptrend and spur the price toward 30 sen-32 sen-34 sen levels.

“Cut loss at 24.5 sen,” it said.