News

• Uzma secured a contract for Leasing, Operation and Maintenance of the D18 Water Injection Facility for Petronas Carigali.

• The duration of the contract is for 5 years leasing period effective from 31 March 2016 with contract value estimated at RM350m to RM400m. 

• With assumptions of: i) net margin of 20%; and ii ) 5 years contract duration, we expect the contract to generate RM14-16m of PAT per annum or 23-26% of our FY15’s PAT.

• We expect the capex of the project to be funded by recently proposed private placement (raising circa RM51m) and debt. We expect earnings accretive for this project.

Highlights

• We are positive and surprise on the contract won given the dry spell in upstream sector after oil price plunged. This reemphasis our investment thesis that Uzma’s exposure to E&P opex instead of capex spending should help it to weather through this challenging period.

• According to Upstream, MISC, Armada, GOM, SK Petro, Scomi and EAH are the other earlier bidders.

• We continue to be impressed by the company’s ability to replenish its contract backlog despite sluggish oil price. We have factored in RM100m contract win in FY15 versus YTD win of circa RM459 to RM509m. We see earnings upside for our FY16 forecast.

• Drilling campaign for Tanjung Baram is on track and close to hitting 1st oil. We have assumed hal f yearly contribution from Tanjung Baram RSC in FY15.

Risks

• Delays in contract disbursement.

• Execution risk.

Forecasts

• Unchanged pending more information from the analyst briefing scheduled on Tuesday.

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.