KUALA LUMPUR (Jan 26): Public Investment Bank Bhd (PIVB) maintained its “outperform” stance on Uzma Bhd, after the company secured a RM40 million contract from Sarawak Shell Bhd, but kept its target price (TP) unchanged at 71 sen per share.
PIVB said the five-year contract, awarded to Uzma’s 70%-owned unit Malaysian Energy Chemical & Services, will keep its oil and gas upstream segment’s outstanding order book healthy at about RM2 billion.
"Although the earnings contribution from this contract is minimal on an annual basis, this contract reaffirms our positive outlook on Uzma as a key beneficiary of increasing brownfield activities, in tandem with increased spending by major oil producers, on the back of stable oil prices at above US$80 per barrel,” the bank said.
Meanwhile, Kenanga Research said that overall, it is positive on the contract win, which reflects the current rise in activity levels, despite its smallish size that makes up only about 2% of Uzma's current order book.
"We expect the job to fetch gross margins of about 40% to 45% in line with its historical average," it noted.
However, the research house downgraded its call for Uzma to “market perform”, with an unchanged TP of 67 sen.
"We continue to like Uzma for being a beneficiary of increased brownfield oil and gas activities, providing a wide range of services such as production enhancement and optimisation, as well as late-life operation and maintenance.
"However, given the recent rally in its share price, we believe these positives have been well priced in.
"Additionally, we believe it is crucial for the company to successfully materialise its current healthy order book into bottom-line earnings to meet profit growth expectations in order to serve as another rerating catalyst,” it added.
At the time of writing on Thursday (Jan 26), Uzma was traded at 62 sen per share, down one sen from previous day’s close, with 951,300 shares traded.