RESULTS

• 15MFY18 performance in-line. The ytd core profit of RM39m is in-line and met 86% of our/90% of consensus 18MFY18 forecast. Note that there is no yoy comparison for the cumulative results as the group changed its FYE from December to June. This strips out one-off items such as RM24.9m net forex losses, RM3.6m gain of disposal of asset, RM5.7m impairment on receivables, a RM15m one-off write back gain post acquisition of the Indonesian unit of a directional drilling company acquired in 2016 and RM3m provision in 2Q17. Although revenues were down yoy and qoq, core profit margins are stable as the group slowly moved out of lower margin projects.

• Orderbook unchanged at ~RM1.8b (2016: RM2.6b). We note that these orderbook is unchanged as it does not include the call-out works and the umbrella contracts that the group had been securing lately which is estimated at >RM0.5b.

• Balance sheet. Cash balance remains strong (RM30m vs RM53m in FY16) given minimal capex outflow, though there was a large debt repayment in the quarter. For 15MFY18, total net gearing ratio declined to 0.8x from FY16, given ongoing paybacks from uzmaWIF.

EARNINGS REVISION

• We retain 18MFY18, FY19, and FY20 earnings forecasts of RM45m/RM38m/RM44m. Firmer oil prices should lend towards better visibility for Uzma’s earnings given that its call-out contracts may see a higher chance of being converted into work orders (and hence to be add on its RM1.8b orderbook base).

RECOMMENDATION

• Maintain HOLD, and target price of RM1.46. Our target price is based on 0.9x P/B and implies 11x 2019F PE, which is in line with that of other small cap asset-light O&G service players such as Deleum. Although share price has weakened due to current market sentiment, we will further review our forecasts and valuation in its upcoming analyst briefing. There is an upgrade bias if we see clearer prospects for maintenance works and earnings upgrades (one catalyst being an upgrade in orderbook). Entry: RM1.00.

Source: UOB Kay Hian Research - 31 May 2018