News

• Uzma announced that it was awarded from PETRONAS Carigali Sdn. Bhd. (PCSB) an umbrella contract for the Provision of 150K, 225K and 460K Hydraulic Workover Unit (HWU).
• The tenure of the umbrella contract is three (3) years from 6 February 2018 to 5 February 2021 with an extension option period of one (1) year.

Financial Impact

• While we are positive on the contract announcement, we believe the positive earnings impact from the contracts to our forecast is still not significant as the revenue would only be booked when the work order is issued by Petronas.
• Exact financial impact is difficult to ascertain as it is based on work order basis.
• On top of that, we believe the margin for the contracts would not be far off from our existing assumed EBIT margin of 6% as we believe Petronas would still be conservative in terms of quotation of its work orders (due to uncertainties in oil prices despite firmer trend).
• The announcement of the contracts indicates a pickup in oilfield maintenance activities, pointing to improvement in activities in the overall upstream industry.

Forecast

• Maintained

Rating

HOLD↔ , TP: RM1.46↔

• While 2017 earnings outlook is gloomy, we believe recovery will be in place in 2018 with ramp up in works for services division expected for the contracts secured by the group in 1H17.

Valuation

• Maintain HOLD with unchanged TP of RM1.46 pegged to unchanged FY18 PER of 12x.

Source: Hong Leong Investment Bank Research - 02 Mar 2018