Oiltek International Shows Resilient Performance Amid Order Book Challenges March 24, 2026
Company Overview
Oiltek International Ltd operates as an engineering, procurement, construction and commissioning (EPCC) contractor specialising in oil refining and renewable energy projects. The company maintains an asset-light business model with strong return on equity metrics, positioning itself as a key player in the sustainable aviation fuel and biodiesel sectors.
Financial Performance and Dividend Growth
The company delivered solid financial results for FY25, with adjusted profit after tax and minority interest (PATMI) reaching 101% of forecasted expectations. Whilst revenue fell short at 83% of projections, Oiltek demonstrated strong operational efficiency through improved gross margins, which climbed to 32.8% in the second half of FY25. This margin expansion reflected the proprietary nature of projects, procurement savings, and successful project completions, maintaining strength despite a stronger ringgit. The company rewarded shareholders with a 33% increase in dividend per share to 1.2 cents.
Market Challenges and Strategic Positioning
New orders secured during FY25 totalled RM152 million, representing a decline from the previous year’s RM207 million. This softening was attributed to changes in Indonesian palm oil policies and the company’s strategic pivot towards recurrent income projects. The order book decreased by 12% year-on-year to RM312.8 million from RM354.9 million, though February announcements of RM37.2 million in new contracts helped rebuild the order book to RM350 million.
Growth Prospects and Market Opportunities
The sustainable aviation fuel market presents significant growth opportunities, with global demand expected to surge from 1.9 million tonnes in 2025 to 7.8 million tonnes by 2030. Recent oil price increases and the drive for energy self-sufficiency are anticipated to accelerate demand for both sustainable aviation fuel and biodiesel. Oiltek is well-positioned to capitalise on these trends through EPCC contracts, ownership stakes in sustainable aviation fuel plants, and contracts in refinery and biodiesel facilities.
Investment Outlook
Phillip Securities Research maintains its target price of S$1.18, valuing Oiltek at 35 times FY26 price-to-earnings ratio—a premium to Malaysian listed peers reflecting the company’s strong earnings growth profile. The firm expects a significant rebound in orders for FY26, driven by both refining and renewable energy projects. With a RM100 million net cash position and 35% return on equity, Oiltek maintains financial flexibility whilst operating an efficient asset-light model.
Frequently Asked Questions
Q: What was Oiltek’s financial performance in FY25?
A: Oiltek’s FY25 adjusted PATMI was within expectations at 101% of forecast, though revenue was below expectations at 83% of projections. The company increased its dividend per share by 33% to 1.2 cents.
Q: How did Oiltek’s gross margins perform?
A: Gross margins improved significantly, climbing to 32.8% in 2H25, up from 27.4% previously. This 5.4 percentage point increase was driven by procurement savings, project completions, and the proprietary nature of projects.
Q: What caused the decline in new orders?
A: New orders fell to RM152 million in FY25 from RM207 million in FY24, primarily due to changes in Indonesian palm oil policies and the company’s strategic pivot towards recurrent income projects.
Q: What is the current status of Oiltek’s order book?
A: The order book declined 12% year-on-year to RM312.8 million, but recovered to RM350 million in February 2026 following the announcement of RM37.2 million in new contracts.
Q: What growth opportunities does Oiltek face?
A: The company is positioned to benefit from surging sustainable aviation fuel demand, expected to grow from 1.9 million tonnes in 2025 to 7.8 million tonnes by 2030, alongside opportunities in biodiesel and refinery projects.
Q: What is Phillip Securities Research’s recommendation?
A: The research house maintains a target price of S$1.18, valuing Oiltek at 35 times FY26 PE ratio—a premium to Malaysian peers due to strong earnings growth prospects.
Q: What are Oiltek’s key financial strengths?
A: The company maintains an asset-light business model with a 35% return on equity and holds RM100 million in net cash, providing financial flexibility for future growth opportunities.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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