Shares of Velesto Energy Berhad shifted higher last week after the Malaysian offshore drilling contractor announced a rare cash dividend and regulatory filings revealed that two major institutional investors had quietly built up their positions — raising a pointed question about whether the company's fundamentals justify renewed confidence or if this is simply yield-chasing in a beaten-down stock. Velesto Energy's Dividend Bump and Pension Fund Buying Lift a Struggling Driller — but Is the Yield Story Enough to Offset Shrinking Profits?
Shares of Velesto Energy Berhad jumped roughly 4% on July 3, from MYR 0.27 to MYR 0.28, after the Malaysian offshore drilling contractor confirmed a MYR 0.007 (0.75 sen) per share interim cash dividend and filings showed major government-linked funds increasing their stakes. The move matters because it tests whether income-hungry investors can prop up a stock whose underlying earnings are moving in the wrong direction.
A Small Dividend Adds Up When the Yield Is This High
Velesto declared an interim dividend of 0.75 sen per share for FY2026 , amounting to roughly RM62 million, to be paid on 17 August 2026 . Layered on top of an earlier RM 0.0225 payout in April, the annualized dividend sits at roughly 0.03 MYR per share, producing a yield of about 8.6% at the current price. TA Securities flagged an attractive 18% potential dividend yield for 2026 if a looming special payout materializes: Velesto is expected to complete the sale of its NAGA 3 rig for US$63 million by mid-2026, and analysts believe proceeds could fund a three-sen special dividend per share . That one-off alone would nearly double the stock price in dividend terms.
Pension Funds Are Buying, but the Earnings Picture Is Weakening KWAP, Malaysia's civil servants' pension fund, and asset manager Abrdn Malaysia have crossed key ownership thresholds, signaling institutional confidence. Yet Q1 2026 revenue fell to RM183 million from RM225 million a year earlier, and profit after tax dropped 47% to RM28 million . The culprit: daily charter rates — the price oil companies pay to rent Velesto's rigs — sank from US$127,000 to US$108,000 . Buying a declining-earnings stock for yield is a bet that the dividend stays funded.
Asset Sales Could Reshape the Balance Sheet — or Mask the Core Problem
Velesto is selling its NAGA 3 rig for US$63 million as part of a fleet optimization strategy, pivoting toward more competitive rigs . It also launched a RM1 billion Islamic bond program to fund refinancing and growth . These moves boost short-term cash, but analysts forecast revenue and earnings declining at roughly 5% and 15% per year, respectively . With an order book of RM1.1 billion and a tender pipeline of RM3.1 billion , contract wins are possible — but far from guaranteed.
The Bigger Question: Can This Yield Hold?
Net assets per share stand at RM0.29 — just a sen above the current price — meaning investors are buying close to book value. That provides a floor, but only if rig utilization and charter rates stabilize. For now, Velesto is a dividend story waiting for an earnings story to catch up.