Uzma‟s FY13 full year results were in line with our estimates, with Revenue of RM407.9m (+41% YoY, 4Q +9% QoQ), and earnings at RM33.6m (+52% YoY, 4Q - 28% QoQ). The positive results was largely attributed to long term contracts secured by Uzma, enhanced by improvement in profit margins from all segments. We understand that the premium on Uzma to-date is mainly due to their special projects, which we believe have resulted in positive share price movement. With the anticipation of potential special project(s) which we understand are in the areas of RSC, EOR and others this year, we are upgrading our TP to RM6.17 but maintaining a Neutral recommendation, as we believe the Group is fully valued at this juncture. Implying a PER of 19x based on FY14 EPS of 32.5sen, our TP is deemed reasonable as global industry peers who have technology based (geoscience, well services and production) capabilities are trading at an average of PER of 19.1x. Uzma a niche player in the Malaysian market is hence viewed in a similar light.

Major catalyst soon? Uzma has lined up a few „special projects‟, possibly EOR, Risk Service Contract (RSC), operational management (smaller than marginal field) and Uzmart (the next generation of UzmapresTM). This is in line with the Group‟s strategy to be an integrated oil and gas (O&G) solutions provider, but with the expertise of geoscience and reservoir engineering. Todate, Uzma‟s secured orderbook stands at RM1.6bn, to last until 2017, and a bid book of RM2.6bn.

Advantages. Uzma has done seismic (early) studies for some of the marginal fields awarded to foreign-local JV. Knowledge of the studies would be an advantage for Uzma to assist in its proposal for its first foray into potential EOR and RSC ventures.

Diversification to strengthen its capabilities. We reiterate that the Group has been expanding its job scope within the O&G segment. With activities such as Aviation - chartering of helicopters (FY13), the Setegap venture – oil well services (FY12), Mecas – manufacture and supply of oilfield chemicals (FY11) and the Mongolian business – oilfield exploration (FY10). The experience we assume would further enhance the Group‟s position as a reputable O&G player.

Neutral with higher TP of RM6.17. Our valuation of Uzma is premised on 19x multiple to its FY14 EPS of 32.5 sen, justified by the Group‟s expertise and specialization in geoscience and reservoir engineering. Uzma has undoubtedly positioned itself to deliver long-term sustainable growth, and pending further contracts we should see the company to grow in a positive direction.

Source: PublicInvest Research - 27 Feb 2014