KUALA LUMPUR (May 15): Shares of UMW Oil & Gas Corporation Bhd (UMWOG) fell this morning after its 1QFY15 profit after tax and minority interests (PATAMI) fell 40% year-on-year.

At 9.34am, UMWOG fell 1.93% or four sen to RM2.03 with 385,000 shares done.

Hong Leong IB Research maintained its “Sell” rating on UMWOG at RM2.07 with a lower target price of RM1.85 (from RM2.50) and said the company’s 1QFY15 PATAMI fell by 40% year-on-year to RM32 million, making up 8.5% and 11% of HLIB and consensus full-year estimates, respectively mainly due to lower charter rate (as a result of higher discount given to existing clients amidst plunged in oil price) and additional expense from Naga 7 (due to early termination of contract).

In a note today, the research house said that in view of the softening charter rate, it had already factored in lower average charter rate of US$142,000/day in FY15 and US$134,00/day in FY16.

“FY15 and FY16 earnings reduced by 48% and 26% respectively after factored in lower utilisation rate on the drilling business.

“We maintain our Sell call with target price adjusted from RM2.50 to RM1.85 based on unchanged 14x FY16 P/E post earnings downgrade,” it said.