Excluding exceptional items amounting to RM4.8m, Uzma reported core net profit of RM13.6m in 1QFY23, increasing >100% YoY from a core net profit of RM4m in 1QFY22. This is in line with topline growth of +20.1% YoY, attributed to higher contribution from the trading and energy segments. Gross and net profit margin expanded 2.8 and 7.3 ppts respectively as efficiency was further improved in absence of restrictive COVID-19 SOPs. Overall, 1QFY23 results are above our and consensus expectations of RM15.2m and RM17.1m respectively in full year FY23 earnings. We are leaving our forecasts unchanged at this juncture pending clarity from management on its current state of operations, though we flag for possible upward revisions as we foresee the remaining quarters’ earnings to be stable on the back of higher construction progress on its renewable energy (RE) project as well as increased oil and gas sector activities. Our Trading Buy call for Uzma with TP of RM0.49 is retained, based on 10x PER over CY23 EPS.

• Improvements, QoQ. Uzma reported core net profit of RM13.6m in 1QFY23 compared to a core net profit of RM8.2m reported in the immediate preceding quarter, on the back of higher revenue (+5% QoQ). Performance was mainly attributed to higher contribution from its Trading segment which increased by RM19.7m (+>100% QoQ), with improved sales of oil field chemicals solution products mitigating the impact of lower revenue from other segments i.e., upstream O&G (-9% QoQ) and new energy (-57.2% QoQ). Gross profit margin on QoQ basis declined slightly by 3.2 ppt though improving at the net level by 4.1 ppt, helped by lower tax provision for the quarter.

• Outlook. We foresee pick-ups in O&G sector activities continuing as oil companies look to increase output amid the current crude oil price remaining stable at above USD80/bbl. The recent contract renewal of the D18 Water Injection Facility indicates the need for oilfields maintenance activities such as water injection, seawater treatment, well interventions and inspections to maintain oil production, even during the period of low oil prices amid yearly natural production decline. Overall, the Group’s outstanding orderbook remains healthy at >RM2.5bn, translating to about 6x of FY21 revenue. That said, we are leaving our forecasts unchanged at this juncture pending clarity from management on its current state of operations.

Source: PublicInvest Research - 1 Dec 2022