Results

• Inline: YoY, 4QFY14 core profit surged by 86% bringing FY14 profit to RM40.5m (+22.5%), making up 100% of HLIB and 98% of HLIB and consensus full-year estimates respectively.

Deviation

• We have strip off one-off items of RM2.2m forex loss and RM1.5m professional fees incurred for the acquisition of MMSVS and PEC.

Highlights

• 4QFY14 revenue surged by 27% YoY and 19% QoQ due to higher contribution from drilling project management for PMU wells coupled with maiden contribution from MMSVS and PEC. Its associate, SVP also performed well with increasing demand for well-pumping and coil tubing services.

• YTD, Uzma has secured a total of RM109m worth of contract to provide well and logging services and this has achieved our full year FY15’s assumption on orderbook replenishment (RM100m). We are impressed with the company’s ability to replenish its contract backlog despite sluggish oil price. In addition, Uzma is looking to secure another 2 units of UzmAPRES contract in near future.

• Drilling campaign for Tanjung Baram is expected to begin in 1Q15 and to hit first oil in May 15. Substantial portion of the US$100m development cost by the JV will be contracted to Uzma. New marginal oilfield project is not viable at current oil price and we have not factored in any new RSC win in our earnings.

• Near term industry 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. However, Uzma’s exposure to E&P opex instead of capex spending should help it to weather through this challenging period.

Risks

• Delays in contract disbursement.
• Execution risk.

Forecasts

• Unchanged.

Rating

BUY

Positives

• Direct exposure to EOR and explorationspending.

Negatives

• Small cap with low liquidity and plunged inoil price.

Valuation

• We maintained our BUY call with TP raised from RM2.29 to RM2.69 after rolled forward valuation to FY16 based on 11x P/E.

Source: Hong Leong Investment Bank Research - 27 Feb 2015