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This article first appeared in The Edge Financial Daily, on October 19, 2015.

Uzma_fd_19Oct2015_theedgemarkets

Uzma Bhd
Oct 16 (RM2.28)
Maintain add with an unchanged target price of RM3.09:
Uzma announced that it had acquired a 30.04% stake in RockWash Prep and Store Ltd, a company based in the United Kingdom, with a core business of providing advance cuttings sample preparation and documentation services to the oil and gas (O&G) industry. 

The acquisition price was not disclosed, but we understand that it is not substantial in relation to Uzma’s financials. The acquisition did not come as a surprise as we had expected Uzma to complete a few more acquisitions within the remainder of 2015.

The acquisition will enhance and complement Uzma’s service offerings in the O&G geoscience subsurface segment, where Uzma is the leading independent service provider in Malaysia. 

Currently, Uzma’s multidisciplinary and innovative solutions for O&G exploration and production cover technical studies in identifying and evaluating hydrocarbon reserves, as well as optimising a field’s production life cycle.

RockWash has developed an innovative method and apparatus (patent pending) for washing and documenting cuttings rock samples from O&G wells. This automated and rapid process gives RockWash’s clients the opportunity to capture key lithological, stratigraphic and hole-condition data during the necessary sample cleaning process.

This acquisition will also add another facet to UzmaLab’s laboratory testing and analysis of reservoir rock offerings.

Uzma currently operates the largest independent laboratory in Malaysia for various subsurface studies, such as routine core analysis, stratigraphy, geochemistry and special core analysis, among others. 

The related PhotoSTRAT service enables the delivery of critical litho-stratigraphic data in real time (well-site based service) or near real time (laboratory-based service) to clients.

We are positive on the acquisition as we believe the technology from RockWash will expand and strengthen Uzma’s geoscience and petroleum engineering department, which may allow it to offer another subsurface service to existing clients in Malaysia and the region. 

However, we keep our earnings forecasts as we have imputed the probability of Uzma completing this acquisition in our current forecast. Potential catalysts are sustained earnings growth and new contract awards. — CIMB Research, Oct 16

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