Deleum activity levels to escalate from 2QFY18 onwards — Analysts

KUALA LUMPUR: Deleum Bhd’s (Deleum) activities are expected to pick up from the second quarter of the financial year 2018 (2QFY18) onwards as Deleum’s maintenance, construction, and modification (MCM) jobs will most likely be recognised towards the latter part of FY18, analysts say.

In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) pointed out that Deleum’s MCM activity levels are expected to pick up from 2QFY18 onwards.

“In 4QFY17, the Integrated Corrosion Services division (the division where the MCM contract is recognised under) experienced margin compression due to the mobilisation and upscaling capacity to support the MCM works,” it highlighted.

Based on the MCM timeline, the research team believe that the earnings upcycle was likely to happen in 2HFY18.

“Our view is largely due to the fact that earnings accretion from the MCM jobs will most likely be recognised towards the latter part of FY18. The bulk of the activity and recognition of earnings will most likely take place in FY19,” it opined.

Aside from that, the research team noted that Deleum had guided that tendering activities and market surveys have increased exponentially this year.

“They are expecting the high rate of tender activities to continue to at least in the middle of FY18 – intensity is approximately two to three-folds that of FY16.

“The two possible reasons why tender activities and market surveys have picked up are long term contracts expiring and fresh bids required, and new contracts being called for new projects,” it added.

Overall, MIDF Research is ‘neutral’ on the stock but it also pegged a ‘positive bias’ based on its prospects.

It poitned out that Deleum’s company fundamentals and prospects remain intact.