KUALA LUMPUR (Feb 21): Phillip Capital has maintained its 'buy' call on Uzma Bhd at RM1.24, with a higher target price (TP) of RM2 from, RM1.30 previously, saying Uzma’s core net profit of RM29 million (26% higher year-on-year or y-o-y) for the first half ended Dec 31, 2023 (1HFY2024) were above house and consensus expectations.

In a note on Wednesday, the research house said that by segment, upstream oil and gas (O&G) services, which accounted for 75% of 1HFY2024 revenue, was the main growth driver, increasing 27% y-o-y, offsetting the weaker trading (-6% y-o-y) and new energy segments.

Phillip Capital said that in tandem with the higher revenue, Uzma's 1HFY2024 core net profit rose 26% y-o-y to RM29 million, from RM23 million a year earlier, which came in above estimates, representing 67% of the house's full-year forecast and 65% of the consensus.

“We believe Uzma is on track to surpassing its record-high profit of RM37 million recorded in FY2014.

“This is driven by an increase in activities, margin expansion from positive rate revisions, and a boost from the non-O&G businesses.

“To reflect the positive outlook, we raise our FY2024 forecast by 17% after considering higher margins for the O&G segment.

“We also raise our FY2025-FY2026 forecasts by 26%-28%, as our previous estimates for non-O&G segment margins were too conservative, with Uzma's solar assets expected to commence operation by the first half of calendar year 2024,” it said.

Phillip Capital raised its TP for Uzma to RM2, based on a higher 12 times price-earnings multiple, from 10 times previously, on revised earnings per share estimated for FY2025.