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This article first appeared in The Edge Financial Daily on January 11, 2018

Uzma Bhd
(Jan 10, RM1.54)
Outperform with an unchanged target price (TP) of RM2.07:
Uzma Bhd announced the securing of three new umbrella contracts from Petronas Carigali Sdn Bhd (PCSB), undoubtedly positive developments for the group despite no specific works being called as yet, or contract quantum revealed. This nevertheless solidifies its growth prospects, and reaffirms our “outperform” call on the stock. Our TP is unchanged at RM2.07 based on an 11 times multiple to forecast financial year 2019 (FY19F) earnings per share (EPS) of 18.8 sen. The group’s performance is expected to continue on an uptrend, with the uplift in oil prices above about US$60 (RM240.60) per barrel levels likely to see oil majors accelerating their capital expenditure spending.

The contracts have been awarded to its wholly-owned subsidiary Uzma Engineering Sdn Bhd for the provision of: i) jointed tubing electrical submersible pumps (ESP) and the deployments; ii) coiled tubing ESP and the deployments; and iii) surveillance, monitoring and maintenance of ESP.

The duration is for three years running from Nov 20, 2017 to Nov 19, 2020, with a first extension option of one year. As is typical with umbrella contracts, execution of works will be dependent on orders extended from time to time at the discretion of PCSB, hence the inability to ascertain any concrete values as such. Suffice to say, however, we believe these contracts will be financially beneficial to the group, and is accounted for as part of our order book replenishment assumptions.

We remain encouraged that Uzma’s activities pickup is a signal of recovery for the group, reaffirmed by a slew of new awards which the group has secured to date since 2017. The group’s performance continues to be supported by its about RM2.6 billion order book and tender book of about RM2 billion to last up to 2019. Current price levels are an opportunity to accumulate, we believe, as prospective FY19F price-earnings are low at only 8.5 times. — PublicInvest Research, Jan 10

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