Uzma announced that it has secured two contracts for the provision of Hydraulic Workover (HWU) and Plug and Abandonment (P&A) – Package A:340k HWU Rig and Package B:460K HWU Rig from PETRONAS Carigali. The combination of both contracts is valued at RM450m with a duration of 3 years, the biggest win for the financial year ending (FYE) June 2023. This development showcases Uzma’s capabilities and expertise in well services for brownfield projects. As the contracts are secured at the tail-end of the financial year, we make no changes to our earnings forecast assuming revenue contributions will only commence more significantly from FYE24 onwards, which we have partially accounted for under replenishment assumptions. All in, we are positive on Uzma’s prospects with an estimated orderbook now at a solid RM2.9bn. On a separate note, the Group has also recently accepted an offer for financing amounting to RM225m for its Large Solar Scale 4 (LSS4) project. We maintain our Outperform call and TP of RM1.10 based on 10x CY24 EPS, though subject to 10% dilution upon completion of its private placement exercise.

• Hits RM1bn worth of works from PETRONAS Carigali. To recap, up until May 2023, Uzma had secured a few major contracts from PETRONAS Carigali including D18 Water Injection Facility, 2-year extension for Coiled Tubing and others with estimated value of RM600m. Including the recent contracts, the estimated value of contracts secured from PETRONAS Carigali has now hit RM1bn for its FYE June 2023. This showcases Uzma’s capabilities and expertise in well services for both productivity and decommissioning activities. (Table 1)
  
  Due to the sizeable contract values, we believe these cover a significant number of 103 identified wells in PETORNAS Activities Outlook. Uzma estimates about RM50-60m of capital expenditure (capex) is required within the next 3 years to execute the contracts, which it is not likely to have any issues funding.
   
• Update on LSS4. Uzma recently accepted a financing facility amounting to RM225m or 98% out of its estimated total cost of RM229m for its LSS4 project, from Affin Islamic and EXIM Bank. It is understood that the financing is ring-fenced against the LSS4 assets. Although the Group has also proposed a private placement of up to 10% of its existing share capital to fund the project, this will provide some buffer for the project if there are further cost variations. At the moment, the project has progressed to 25% completion as of April 2023. The project is expected to be fully completed by June 2024.

Source: PublicInvest Research - 22 Jun 2023