News

• Uzma has secured a contract by Petronas Carigali for the provision of cased hole electric-line services.

• The contract value is RM59m with duration of 2 years from 28 Jan 15 to 27 Jan 18 with an extension option of 1 year.

• The project could become not viable if crude oil price falls below US$25-30/bbl.

Financial impact

• This will be part of orderbook replenishment and YTD win has achieved our full year FY15’s assumption on orderbook win. We have factored in RM100m contract win in FY15 (YTD win is circa RM109m).

Pros/Cons

• We are positive on the contract awards as this show the company’s ability to replenish its contract backlog despite sluggish oil price. Near term outlook remain cautious as we expect oil price to continue to remained weak for next few months given the oversupply issue will only adjusted if there is any reduction from US shale’s production.

• Marginal oilfield project is also not viable at current oil price (we have not factored in any new RSC win in our earnings).

• Drilling campaign for Tanjung Baram is expected to begin in 1Q15 and expects to hit first oil in May 15. Substantial portion of the US$100m development cost by the JV will be contracted to Uzma.

Risks

• Delays in contract disbursement.
• Execution risk.

Forecasts

• Unchanged pending quarter earnings announcement.

Rating

BUY

Positives

• Direct exposure to brownfield and EORspending.

Negatives

• Small cap with low liquidity and plunged inoil price.

Valuation

• We maintained our BUY call with TP under review and pending quarter earning announcement.

Source: Hong Leong Investment Bank Research - 18 Feb 2015