UMW - O&G IPO Briefing
Author: HLInvest | Publish date: Mon, 20 May 2013, 10:54 AM
The listing of UMW OG will only include 4 Naga drilling rigs (1 submersible and 3 jack-ups), 4 Gait HWUs (hydraulic workover units), OCTG (oil country tubular goods) services and power supplies solutions. The other remaining O&G businesses will be re-categorized to UMW’s other segment.
Management indicated that most of the injected businesses are making good profits. The audited accounts showed UMW OG making RM78.2m in FY11 and RM73.8m in FY12 (the lower yoy earnings was due to the refurbishment of Naga 1, making it out of business for 9-mth).
We believe bulk of the earnings was attributed to Naga drilling rigs, which fetch around 25-30% margin.
Contract Start - Contract End - Contract Value
The market has been expecting UMW OG to raise US$500m from the IPO. We expect UMW OG to be on acquisition spree to purchase another 2 drilling rigs which cost US$200m each unit.
Domestically, the ETP driven RM300bn Capex spending to enhance exploration, EOR and marginal fields requires a massive level of drilling activity which we believe the markets underestimate and currently there are difficulties in securing enough quality drilling rigs to meet requirements.
Source: Hong Leong Investment Bank Research - 20 May 2013
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