Stock Name: UMW
Company Name: UMW HOLDINGS BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research is keeping its Buy call on UMW Holdings (RM6.67; Buy; Price Target: RM7.40).



The research house said on Wednesday, Sept 8 that it expected a negligible downward impact on FY10F forecast net profit following the one-month delay in the signing the US$183 million charter for its Naga 2 jack-up rig.



The contract lasting 3.7 years, consists of seven firm wells and 13 option wells. This has a negligible downward impact of less than 0.5% on its FY10F forecast net profit, "because we have factored in only one quarter (4Q10) of contribution in our FY10F projection for UMW".



This delay would not affect FY11F and FY12F projections. While UMW intends to sign the agreement by the end of this month, it would take about one month to prepare the Naga 2 rig, and to mobilise it to the designated location.



"Hence, revenue would likely to start in Nov10, at the earliest; with full-year contribution in FY11F.



Hence, we are keeping our forecasts, BUY call on UMW and sum-of-parts price target of RM7.40. The stock offers potential capital appreciation of 11% plus 3% net dividend yield," it said.