Stripping-out exceptional items amounting to RM4.9m, Uzma reported core net profit of RM6.6m in 1QFY21, turning around from core net loss of RM22.1m in 4QFY20. This is in spite of a 34.4% QoQ contraction in revenue to RM99.6m, though this already anticipated given the current volatility in oil prices. Nevertheless, stability was seen for some of the Group’s projects such as D18 and MECAS which helped maintain profitability. The numbers are ahead of our and consensus expectations, accounting for 34% and 38.1% of earnings projections though we deem it as in line given expected volatilities in the quarters ahead (bad weather, lag effects of Petronas’ capex reduction). We leave our forecasts unchanged, with TP of RM0.48 (based on 7x PER over FY22 EPS) and Neutral call unchanged.
- A good start. Uzma reported core net profit of RM6.6m in 1QFY21 despite reporting lower revenue by 34.4% QoQ. Lower revenue is largely anticipated on the back of lower activities performed as a result of the Covid-19 pandemic and current oil price volatility. Nevertheless, profit margins improved, mainly attributed to the Group’s initiative in implementing cost reduction measures amid the current operating climate.
- Our view. Despite the commendable 1QFY21 performance, our cautious stance remains given the expected volatilities in the quarters ahead. Work orders from oil majors may slow with capex and opex reductions still evolving. We are maintaining our earnings estimates to account for the lagged effects of Petronas’ capex reduction that could affect some of work orders to be issued. A recent spike in local Covid-19 cases and reenforcement of the CMCO are raising levels of caution. We foresee standard operating procedures (SOP) at work sites getting more stringent, thereby lowering efficiency levels given the disruption in operations across the supply chains. Although the Group has expanded its business to other regions, the Malaysian operations still contributes the lion’s share (c. 90%) to overall revenue.
Source: PublicInvest Research - 26 Nov 2020
