Uzma secured a contract from Valeura Energy, a Canada-based company for the provision of Coiled Tubing Services via its wholly-owned subsidiary incorporated in Thailand, MMSVS Group Holding Co Ltd. The value of the contract is RM45m with a three-year duration plus two-year extension option. We are positive on this development as it demonstrates Valeura Energy’s confidence as a new owner of the oilfield and validates Uzma’s strong track record in delivering valued services for the previous contract. We also believe the embarking of Valeura Energy as the largest independent oil producer in Thailand as a new client would solidify Uzma’s presence on the regional front despite this contract value being relatively small compared to its existing oil & gas segment orderbook of RM2bn. We maintain our earnings forecast, having assumed this contract as part of our replenishment assumption. We retain our Outperform rating with an unchanged TP of RM1.05.

• A renewal, with higher contract value. Based on our checks, Valuera Energy is the largest independent oil producer in Thailand after the recent acquisition of Mubadala Petroleum’s assets in March 2023 including Block B5/27 (Jasmine and Ban Yen oilfields). To recap in February 2020, Uzma secured a contract for similar services worth RM23m with three plus two years extension from Mubadala Petroleum’s MP B5 (Thailand) Ltd. With the upward contract revision, we are positive on this development as it also demonstrates Valeura Energy’s confidence as the new owner of the oilfield and validates Uzma’s strong track record in delivering valued services for the previous contract.

• Positive contribution. Assuming a net profit margin of 7%, this project is expected to contribute c. RM3.1m to the bottom line, spread over FY24- FY26. We kept our forecast unchanged nonetheless, having assumed this contract as part of our replenishment assumption.

• Outlook and result preview. The upward revision in contract value reaffirms our solid outlook on the trajectory of the oil producers’ capital expenditure plans despite recent moderations in oil price. We expect more contracts with higher revisions will be secured by Uzma as a key beneficiary of increasing brownfield activities. Nevertheless, we expect the upcoming 3QFY23 financial result will come in flat or slightly lower on a QoQ basis. This is due to monsoon season during the period, with 3Q usually the weakest quarter for its financial year. We believe the higher revision in some contract values could offset the decline on a QoQ basis however.

Source: PublicInvest Research - 12 May 2023