Velesto Energy Bhd (Velesto) has shown notable improvements in its environmental, social, and governance (ESG) practices, reflected in its updated ESG score. Following the release of its financial year 2023 (FY23) Annual and Corporate Governance Reports, Velesto received an ESG score of 51 out of 100, marking a significant enhancement from its previous score of 44 for FY22. Maybank Investment Bank Bhd (Maybank IB) maintains a BUY recommendation for Velesto, with an unchanged target price of RM0.32, based on a valuation of 13 times the mid-FY25 estimated earnings per share (EPS).

Despite the improved ESG rating, Velesto reported increased emissions, including Scope 1, nitrogen oxides, and ammonia emissions in FY23. The company also experienced an upward trend in average water consumption per rig and total waste generated. Nevertheless, MIB said it achieved a noteworthy reduction in greenhouse gas emission intensity, with zero cases of environmental non-compliance reported over the past three years, reflecting Velesto's commitment to improving its environmental footprint.

In terms of social metrics, Velesto made strides by increasing the average number of training days per employee to 1.3 days in FY23, up from 0.8 days in FY22. The company also recorded a lost time injury frequency rate of zero in FY23, a significant improvement from the 0.5 rate observed in both FY21 and FY22. Additionally, Velesto has implemented key performance indicator linked remuneration tied to sustainability metrics, marking a positive development in its governance structure.

The company's commitment to safety and environmental sustainability is further demonstrated by its ambitious goals set for FY23. These include achieving a zero lost time injury rate, preventing major spills, and reducing emission intensity by 10% per operating day by 2030. Remarkably, Velesto has already accomplished the emission reduction target ahead of schedule in FY23.

Maybank IB has estimated utilisation rates for Velesto's operations to be 82%, 90%, and 83% for FY24, FY25, and FY26 respectively while projecting average day rates for its rigs to be US$119,000, US$127,000, and US$135,000 over the same period. With its focus on enhancing operational efficiency and a commitment to sustainability, Velesto is well-positioned to continue its growth trajectory.