Deleum Berhad (Deleum) has reported a strong performance for the first half of fiscal year 2024 (1HFY24), with a notable 77% year-on-year increase in normalised earnings and a 24% rise in revenue. The company's revenue surged to RM387.3 million, driven primarily by robust performance in the Power and Machinery (P&M) and Oilfield Integrated Services (OIS) segments. This impressive growth, however, was partially offset by higher operational expenditures.
MIDF analysts have maintained a BUY call on Deleum, revising the target price to RM1.64 from RM1.58. This adjustment reflects an optimistic outlook for the upstream oil and gas services sector, bolstered by expected stable Brent crude prices and increased upstream capital expenditure for the year. The current share price stands at RM1.25, suggesting a potential upside of 45.9% with an expected total return of 49.3%, including a dividend yield of 3.4%.
Deleum's strong performance was evident as its 1HFY24 earnings exceeded both yearly earnings estimates and consensus projections. Revenue from the P&M segment increased by 21% year-on-year to RM306.1 million, supported by higher activity in engine deliveries and retrofit income. Despite some challenges, including reduced sales of turbine parts and higher operational costs, the segment's earnings rose by 55.7% year-on-year to RM52.4 million.
In the OIS segment, revenue grew by 38.8% year-on-year to RM80.9 million, while earnings saw a remarkable turnaround from a deficit to a profit of RM3.5 million. This growth was driven by increased activities in slickline operations and well stimulations, though some segments faced declines.
A key development in 2QFY24 was the merger of Deleum's Integrated Corrosion Solutions with Oilfield Services, rebranded as OIS. This strategic move aligns with the company's goals of market expansion and clearer service segmentation.
The analysts anticipates continued robust performance from Deleum, buoyed by a stabilised oil price environment and increased upstream activities. The revised earnings estimates for FY24-25 have been increased by 13% and 3% respectively, supporting the revised target price of RM1.64.