UZMA (7250) - Uzma - New contract (electric)-lined up
Target RM2.65 (Stock Rating: ADD)
Despite the current uncertainty in the oil and gas industry, Uzma continues to be successful in securing new contracts, underscoring its well-diversified and strong execution capabilities. Its latest win, a RM59m 2-plus-1 year contract from Petronas Carigali for cased hole electric-line logging perforation and other services, is further testament to this, and should contribute positively to its earnings in FY15-16. We make no changes to our EPS forecasts and target price, which is still based on 10.5x CY16 P/E (at a 30% discount to the oil & gas big caps). We reiterate our Add call. The commencement of production at its Tanjung Baram marginal oilfield is a potential rerating catalyst.
What Happened
Uzma today announced that its wholly-owned subsidiary Uzma Engineering Sdn Bhd has been awarded a contract by Petronas Carigali Sdn Bhd for the provision of cased hole electric-line logging perforation and other services. The duration of the contract is for two years effective 28 January 2015, with the option to extend for an additional one year period, until 27 January 2018. The contract is valued at RM59m for the primary period.
What We Think
We are not surprised by the contract award, as Uzma’s well-diversified services offering allows it to continuously look for new opportunities to bolster its order book. This contract will be undertaken by the group’s wireline services, which fall under its drilling and well services (DWS) segment. We expect the contract to contribute positively to Uzma’s revenue and bottom line for FY15-16, increasing Uzma’s EPS by 2.2sen for FY15 and FY16 respectively, with a highly likely extension into FY17. However, we are maintaining our EPS forecasts as we had factored in the possibility of the group securing the contract in our forecasts. The contract win further underscores Uzma’s capability in securing contracts even during uncertain times for the oil and gas industry due to its well-diversified capabilities in offering integrated services that caters to the exploration and production activities (capex), as well as operation and maintenance activities at the currently producing oilfields (opex).
What You Should Do
Continue to accumulate the stock. Uzma is well-positioned to capitalise on the current uncertainties surrounding the oil & gas industry, with oil producers cutting down on their capex and increasing their focus on opex activities to maximise production at their existing oilfields. Its asset-light business model and low gearing limits its downside risk in the current industry environment.
Source: CIMB Daybreak - 18 February 2015
Target RM2.65 (Stock Rating: ADD)
Despite the current uncertainty in the oil and gas industry, Uzma continues to be successful in securing new contracts, underscoring its well-diversified and strong execution capabilities. Its latest win, a RM59m 2-plus-1 year contract from Petronas Carigali for cased hole electric-line logging perforation and other services, is further testament to this, and should contribute positively to its earnings in FY15-16. We make no changes to our EPS forecasts and target price, which is still based on 10.5x CY16 P/E (at a 30% discount to the oil & gas big caps). We reiterate our Add call. The commencement of production at its Tanjung Baram marginal oilfield is a potential rerating catalyst.
What Happened
Uzma today announced that its wholly-owned subsidiary Uzma Engineering Sdn Bhd has been awarded a contract by Petronas Carigali Sdn Bhd for the provision of cased hole electric-line logging perforation and other services. The duration of the contract is for two years effective 28 January 2015, with the option to extend for an additional one year period, until 27 January 2018. The contract is valued at RM59m for the primary period.
What We Think
We are not surprised by the contract award, as Uzma’s well-diversified services offering allows it to continuously look for new opportunities to bolster its order book. This contract will be undertaken by the group’s wireline services, which fall under its drilling and well services (DWS) segment. We expect the contract to contribute positively to Uzma’s revenue and bottom line for FY15-16, increasing Uzma’s EPS by 2.2sen for FY15 and FY16 respectively, with a highly likely extension into FY17. However, we are maintaining our EPS forecasts as we had factored in the possibility of the group securing the contract in our forecasts. The contract win further underscores Uzma’s capability in securing contracts even during uncertain times for the oil and gas industry due to its well-diversified capabilities in offering integrated services that caters to the exploration and production activities (capex), as well as operation and maintenance activities at the currently producing oilfields (opex).
What You Should Do
Continue to accumulate the stock. Uzma is well-positioned to capitalise on the current uncertainties surrounding the oil & gas industry, with oil producers cutting down on their capex and increasing their focus on opex activities to maximise production at their existing oilfields. Its asset-light business model and low gearing limits its downside risk in the current industry environment.
Source: CIMB Daybreak - 18 February 2015
