KUALA LUMPUR (June 30): Enproserve Group Bhd could offer a 25% upside from its listing price as the oil and gas maintenance firm gears up for a major surge in demand for its services, said Kenanga Investment Bank.
En route to the ACE Market, the company has multiple long-term contracts covering the majority of facilities at the Pengerang Integrated Complex that could see significant ramp-up in preparation works next year for the actual plant turnaround in 2027, according to Kenanga in an unrated note.
“We feel that the company is just at the early stage of entering its earnings upcycle due to the anticipated Pengerang plant turn-around and ramp-up in plant maintenance demand,” Kenanga said.
Turnaround activity in the oil and gas industry typically involves shutting down refineries' operations for maintenance or upgrades. Turnarounds are typically planned extensively due to the cost involved and potential revenue loss.
Downstream plant turnarounds are cyclical and occur in intervals of three to five years, rather than on an annual basis.
Kenanga is valuing Enproserve at 30 sen versus its initial public offering (IPO) price of 24 sen per share. The target is based on 10 times its forward earnings, slightly higher than the valuations for its peers, a premium which Kenanga says Enproserve deserves due to the potential earnings upcycle.
The Bursa Malaysia Energy Index is trading at about nine times the forward earnings, which Kenanga said reflects the potential downside risks in upstream services, particularly in 2026 onwards, due to bearish oil price outlook.
“In comparison, we believe that the downstream maintenance players will be more sheltered and operate on a different cycle compared to upstream services,” Kenanga said, noting that Enproserve would also be the only pure-play downstream maintenance stock.
Applications for the IPO shares will close on July 8 and listing has been scheduled for July 18. About two-thirds of the IPO proceeds to the company have been allocated for capital and operational expenditure.
Further, the company’s net gearing would decline significantly post-IPO to just 0.1 times from 0.7 times at the end of 2024, Kenanga noted, adding that the extra space will allow Enproserve to expand its equipment and crane fleet further to better capitalise on the upcycle.