Oiltek International’s FY2025 Profits Come From Turning Waste Into Fuel

Introduction: The Paradox of Modern Energy

In the global industrial theater, few challenges are as acute as the “energy trilemma”—the requirement to maintain traditional industrial output while simultaneously architecting a bridge to a decarbonized future. For mid-cap engineering firms, this transition is often fraught with execution risk; however, for Oiltek International Limited, the shift is manifesting as a profound transformation of their margin profile.

Oiltek’s FY2025 results present a classic financial paradox: a headline revenue contraction of 8.2% juxtaposed against a rise in net profit. To the casual observer, the 7.9% net profit growth appears modest. To the senior analyst, however, this discrepancy signals significant operational leverage and a fundamental revenue mix shift toward high-margin renewable energy solutions.

The “Invisible” 49% Profit Surge: Normalizing for Non-Operating Items

While the reported net profit after tax reached RM32.0 million, this figure significantly understates the Group’s true earning power. The bottom line was burdened by a net foreign exchange loss of RM8.2 million, triggered by the rapid weakening of the United States Dollar against the Malaysian Ringgit.

Crucially, as noted in the Group’s Statement of Cash Flows, these are largely non-cash, unrealized translation losses on monetary financial assets. When these paper losses are normalized, the Group’s underlying net profit would have surged by 48.7% to RM40.2 million. This “hidden” growth reflects superior project execution and cost-structure optimization, proving that the company is extracting more value even as project cycles fluctuate. This is the definition of operational health: achieving margin expansion despite top-line headwinds.

Renewable Energy: The 250% Growth Engine

The Group’s revenue profile is undergoing a radical transition. The traditional Edible & Non-Edible Oil Refinery segment reported a 30.7% revenue decline (to RM134.4 million), but this must be viewed through the lens of contractual fulfillment cycles. The decline was primarily due to the substantial completion of several large-scale projects in Indonesia and Africa secured in prior years, rather than a loss of market share.

In contrast, the Renewable Energy (RE) segment has moved from a peripheral contributor to a primary growth driver. RE revenue skyrocketed from RM17.7 million to RM61.7 million—a staggering 249.7% increase.

CEO Henry Yong Khai Weng identifies this as the cornerstone of the company’s evolution, stating that the Group is now “primed for our next phase of growth” through a resilient business model and proprietary patented technology. By securing high-value sustainability projects in Malaysia, Oiltek is effectively replacing legacy income with higher-growth, future-ready revenue streams.

A Fortress of Liquidity: The 99.9% Cash Ratio

In a high-interest-rate environment where credit availability can constrain engineering firms, Oiltek’s balance sheet provides a distinct competitive moat. As of December 31, 2025, the Group maintains a “fortress” position:

• Zero Debt: The company operates entirely without bank borrowings, insulating it from rising finance costs.
• Total Liquidity: Cash and bank balances stand at RM99.7 million.
• Asset Quality: In a rare display of liquidity, this cash position represents 99.9% of the Group’s total net assets (RM99.9 million).

This level of capital reserves is not merely a safety net; it is a strategic weapon. With almost the entirety of the company’s net value held in liquid cash, Oiltek possesses the “dry powder” necessary to secure the larger-scale, capital-intensive projects defined in its outlook without diluting equity or incurring debt.

The SAF Value Chain: Positioning for a Regional Supply Gap

The Sustainable Aviation Fuel (SAF) market represents the most significant long-term catalyst for the Group. With the aviation industry targeting net-zero by 2050, the demand for low-carbon jet fuel is projected to reach 17.6 million tons by 2035.

Oiltek is positioning itself as a critical upstream technology provider within the ASEAN corridor—a region poised to produce 8.5 million barrels of SAF daily by 2050. Internal demand within ASEAN is forecasted to scale from 15,000 barrels per day in 2030 to over 700,000 barrels per day by 2050, with Vietnam, Thailand, and Indonesia emerging as production hubs.

Oiltek’s competitive advantage is technical: their plants can treat and cleanse Palm Oil Mill Effluent (POME) and other agricultural waste into ISCC-compliant feedstock. This treated material is the essential precursor for Hydrogenated Vegetable Oil (HVO), which is then upgraded to SAF. By owning the process technology that turns industrial waste into high-value green fuel, Oiltek has secured its place as a first-mover in a niche but essential value chain.

Rewarding the Patient Investor: Normalized Dividend Growth

The Group’s maturity was formally recognized on June 6, 2025, with its successful transfer from the SGX Catalist to the SGX-ST Mainboard. This transition to a more prestigious listing tier has been accompanied by robust shareholder returns.

For FY2025, the Board proposed a total dividend of 1.2 Singapore cents per share, representing 52.5% of net profit. However, a simple year-on-year comparison is deceptive due to the 1-for-2 bonus issue completed in May 2025, which tripled the share base to 429 million shares. When adjusted for this issuance, the total dividend is equivalent to 3.6 Singapore cents per share—representing a 33.3% increase over the 2.7 cents declared in the previous year.

Conclusion: Resilience Built on Engineering Visibility

Oiltek enters 2026 with an order book of RM312.8 million, providing high visibility for the next 18 to 24 months. While the Edible Oil segment provides a stable foundation based on growing global fats and oils consumption (projected to reach USD646.10 billion by 2032), the Renewable Energy segment provides the alpha.

The core takeaway for investors is that Oiltek is no longer just a traditional engineering firm; it is a liquidity-rich, debt-free technology play on the global energy transition. The true indicator of its future value lies not in its revenue fluctuations, but in its ability to convert industrial waste—like POME—into the high-margin, green energy commodities of the next decade.

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