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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 23 Apr 2019, 10:09 AM

 

Uzma Berhad - New Indonesian Contract

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Uzma reported that its 95% sub-subsidiary, PT Cougar Drilling Solutions Indonesia (PT.CDSI) has been awarded a contract for the provision of directional drilling services by Pertamina Hulu Energi Onshore North West Java (PHE ONJW). Though specific details and value were undisclosed as the contract depends on work orders to be issued to PT.CDSI from time to time at the discretion of PHE ONWJ, we are positive on this development as it signifies the Group’s ability in securing new contracts, not only in Malaysia but also in the region. We keep our forecast unchanged nonetheless as we assume this contract is within our job replenishment target for the year. Uzma’s earnings outlook remains intact on the back of an approximate RM1.2bn balance order book in hand coupled with its stable profit margins of above 30% at gross level. We thus retain our Outperform rating on Uzma at an unchanged TP of RM1.12 based on a 10x PE multiple to FY20F EPS of 11.2sen.

  • The contract. The Group has been awarded a contract by PT Pertamina Hulu Energi Onshore North West Java for the provision of directional drilling services. The duration of the contract will be 2 years starting from 25 Feb 2019 to 25 Feb 2021 with an extension option which is subject to the approval of SKK MIGAS, an institution established by the Indonesian Government tasked with managing upstream oil and gas business activities. The contract does not constitute a commitment for any specific work as it is depending on work orders to be issued to PT.CDSI from time to time. Hence, there is no firm value for this contract. We understand that Uzma will make the required announcement as and when a material sum of work order is received.
  • Our view. We are not surprised with this contract given Uzma’s capability in securing new contracts, not only in Malaysia but also within the region. Uzma also has track record of consistent delivery. We have accounted for this contract as part of our orderbook replenishment assumptions. Hence, no change to our earnings estimates.
  • Outlook. Uzma earnings’ outlook remains promising backed by, i) its healthy outstanding orderbook in hand of about RM1.2bn, ii) stable gross profit margins above the 30% level, and iii) active tenderbook of around RM3bn. Uzma’s activities are expected to pick-up in 2H2019 in line with the stable industry outlook.

Source: PublicInvest Research - 15 Mar 2019

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