UMWOG (5243) : UMW Oil & Gas - Bigger fleet oils the way to record quarter and maiden dividend
Target RM5.11 (Stock Rating: ADD)
Armed with an expanded fleet of jack-up drilling rigs, UMW-OG posted a record 9M14 performance, with net profit forming 64% of our FY14 forecast and 67% of consensus. We deem 9M14 net profit broadly in line as we expect robust 4Q14 performance, with first contribution from the latest jack-up, Naga 6. We continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. We maintain our Add call, with active fleet expansion and an upcoming contract for Naga 8 as potential re-rating catalysts.
16% yoy jump in 3Q net profit
The higher utilisation and margin improvement for Naga 3, as well as the deployment of Naga 5 in May 2014, jacked up UMW-OG's 3Q net profit by 16% yoy to a new record. This led to a 31% yoy increase in 9M net profit, which is also a new high. The record performance led to a maiden interim DPS of 1 sen, which met our expectation but was a nice touch nevertheless.
Aggressive fleet expansion and RM2bn orders
Riding on the high demand for jack-ups in Malaysia and other markets in Southeast Asia, UMW-OG is aggressively adding new assets. Naga 6 started work in Vietnam in Oct 2014 and is set to contribute to the robust 4Q earnings, anticipated to be the highest quarterly net profit in FY14. Naga 7, which will be delivered next month, has been signed up for work in the Philippines effective in Jan 2015. Naga 8, which is slated for delivery in Dec 2015, has yet to be contracted, but we understand that it is on the verge of clinching a contract. The company has an order book of around RM2bn and is bidding for jobs worth a total of RM6bn.
From Southeast Asia to the Middle East
Although Malaysia remains an attractive market, UMW-OG is steadily strengthening its presence in other Southeast Asian markets. Its next stop is the Middle East, where the company targets to secure its first contract by end-FY15. The company's fleet composition of rigs working in Malaysia and overseas is expected to shift from 75:25 in FY13 to 40:60 in FY15.
Source: CIMB Daybreak - 25 November 2014
Target RM5.11 (Stock Rating: ADD)
Armed with an expanded fleet of jack-up drilling rigs, UMW-OG posted a record 9M14 performance, with net profit forming 64% of our FY14 forecast and 67% of consensus. We deem 9M14 net profit broadly in line as we expect robust 4Q14 performance, with first contribution from the latest jack-up, Naga 6. We continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. We maintain our Add call, with active fleet expansion and an upcoming contract for Naga 8 as potential re-rating catalysts.
16% yoy jump in 3Q net profit
The higher utilisation and margin improvement for Naga 3, as well as the deployment of Naga 5 in May 2014, jacked up UMW-OG's 3Q net profit by 16% yoy to a new record. This led to a 31% yoy increase in 9M net profit, which is also a new high. The record performance led to a maiden interim DPS of 1 sen, which met our expectation but was a nice touch nevertheless.
Aggressive fleet expansion and RM2bn orders
Riding on the high demand for jack-ups in Malaysia and other markets in Southeast Asia, UMW-OG is aggressively adding new assets. Naga 6 started work in Vietnam in Oct 2014 and is set to contribute to the robust 4Q earnings, anticipated to be the highest quarterly net profit in FY14. Naga 7, which will be delivered next month, has been signed up for work in the Philippines effective in Jan 2015. Naga 8, which is slated for delivery in Dec 2015, has yet to be contracted, but we understand that it is on the verge of clinching a contract. The company has an order book of around RM2bn and is bidding for jobs worth a total of RM6bn.
From Southeast Asia to the Middle East
Although Malaysia remains an attractive market, UMW-OG is steadily strengthening its presence in other Southeast Asian markets. Its next stop is the Middle East, where the company targets to secure its first contract by end-FY15. The company's fleet composition of rigs working in Malaysia and overseas is expected to shift from 75:25 in FY13 to 40:60 in FY15.
Source: CIMB Daybreak - 25 November 2014
