Results

• Inline: YoY, 1QFY15 core profit surged by 56%, making up 22% of HLIB and consensus full-year estimates respectively.

Deviation

• We have strip off one-off items of RM5.1m forex loss in 1QFY15 and expect stronger 2H due to contribution from RSC contract.

Highlights

• 1QFY15 core profit (excluded forex loss of RM5.1m) surged by 56% YoY due to higher cont ribution from drilling project management for PMU wells, maiden contribution from MMSVS and PEC coupled with higher income from its associate, SVP.

• In the meantime, Uzma’s 40% associate, S azma A viation also announced to secure RM167m worth of contract to provide helicopter services for Petronas. We are impressed with the company’s ability to replenish its contract backlog despite sluggish oil price.

• 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 produc tion. 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

• Di rect exposure to EOR and exploration spending.

Negatives

• Small cap with low liquidity and plunged in oil price.

Valuation

• We maintained our BUY call with unchanged TP of RM2.69 based on unchanged 11x FY16 P/E.

Source: Hong Leong Investment Bank Research - 26 May 2015