News

• Uzma has proposed private placement of up to 10% of share capital which would be implemented in tranches within 6 months from the date of approval by Bursa Malaysia.
• Final issue price would be determined separately for each tranche.
• The proposed private placement would raise up to RM50.6m with utilisation of proceeds as below: RMm Utilisation of proceeds CAPEX and future developments 30.0 Repayment of bank borrowings 15.0 Working capital 4.9 Listing expenses 0.8 Total 50.6 HLIB Financial Impact
• We are neutral on the announcement as the main utilisation of the proceeds raised is to fund the upgrade and refurbishment of its fleet of wire line and hydraulic workover unit (HWU), in order to execute the umbrella contract sitting on its orderbook (RM2bn for the duration of 3 years).
• The RM15m payment of borrowings would bring about RM1.2m savings in interest cost per annum.
• Overall, the performance of the group hinges on the work , orders (both HWU & wireline) to be issued by Lundin, Murphy Oil and Petronas Carigali.
• According to 5-day VWAMP which is RM1.83/share, the illustrative placement price would be RM1.74/share, implying circa 10% dilution in EPS.

Forecast

• Maintained.

Rating

HOLD (↔)

• 2017 would be a better year for UZMA but the improvement is broadly priced in at current share price level with forward FY17 PER of 12.7x, relatively higher than industry average of 10x.

Valuation

• TP is maintained at RM1.70 based on 12x FY17 PER with HOLD call maintained on the stock. We opt to hold out for 1 or 2 more quarters of financial results to better gauge the positive impact of the umbrella contract.

Source: Hong Leong Investment Bank Research - 08 May 2017