KUALA LUMPUR: Favelle Favco Bhd 's recent purchase orders could suggest growing momentum in the group's financial performance, says MIDF Research.

       In a filing with Bursa Malaysia on Tuesday, the oil and gas services provider said four of its subsidiaries had each secured a new contract order, the combined value of which amounts to about RM37.1mil.

       Following these contract wins, the group's orderbook stands at about RM621mil.

       Given that Favelle Favco had showed an improved financial result in 1HFY21, MIDF Research views the new purchase orders as further testimony to the company's earnings growth.

       "We continue to view FFB positively with its latest purchase order, and continue to see the new contract wins as further improvement of FFB’s financial performance," it said in a note.

       Favelle Favco, like other oil and gas services firms, was negatively impacted by the resurgence of the Covid-19 pandemic in 1HFY21 as projects were delayed and higher operating costs were reported due to border restrictions.

       MIDF said Favelle Favco's financial results in 1HFY21 barely reached its expectations due to the resurgence of the Covid-19 pandemic. However, the group's earnings and revenue were significantly improved, rising 30% and 14% year-on-year respectively during the period.

       In addition, the research house said FFB will be a beneficiary of the current crude oil rally with the expectation of more offshore exploration and drilling operations.

       "We believe that the outlook for the sector is positive in the near term with FFB set to be a beneficiary.

       "We opine that strong demand for crude oil amid the tightening global supply will call for more offshore exploration and drilling operations, hence increase demand for offshore and shipyard cranes to be utilised," it added.

       The research house cautioned however that the uncertain impact from the pandemic in the near term continues to be a major risk factor.

       MIDF maintained its earnings forecast for Favelle Favco for FY21-23 as the latest contract wins fall within its expectation.

       It maintained a "buy" call on the stock with a target price of RM2.72.