News

• Uzma proposed private placement by issuance of further 21.6m new shares representing circa 8.01% of the existing share based.

• This is after 5.35m new shares issued earlier at RM2.15 per share to partly finance further acquisition of 18.98% stake in Setegap Ventures Petroleum (SVP), increasing stake from 30.02% to 49%. The latest placement shares are intended to place out to third party investors with indicative price of RM2.36 per share.

• We believe the private placement is expected to raise circa RM51m to fund potential new projects and partly repayment of bank overdrafts and for working capital purpose. Financial Impact

• Despite the proposed private placement will enlarged share based by 8%, we expect the fund utilise for new potential project which will more than offset the dilutive impact.

Highlights

• We are positive on the fund raising given this will lower its gearing from 0.36x to 0.26x and we believe the fund raising proceed will used to fund new potential project which will enhance EPS.

• We are impressed by the company’s ability to repl enish its contract backlog despite sluggish oil price. We have factored in RM100m contract win in FY15 versus YTD win of circa RM109m. Any further contract win will prompt us to raise our earnings forecasts.

• 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 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 - 29 Jun 2015