Uzma announced that it was awarded from Petronas for an umbrella contract for the Provision of Well Abandonment Integrated Services. The tenure of the umbrella contract is 2 years from 29 Mar 2018 to 29 Mar 2020, with an extension option period of 1 year. While we are positive on the contract announcement, we believe the 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. On top of that, we believe the margin for the contracts would not be far off from our existing assumed EBIT margin of 6%. Maintain forecast and HOLD call with unchanged TP of RM1.46 (12x FY18 P/E).

NEWSBREAK

Uzma announced that it was awarded from Petronas for an umbrella contract for the Provision of Well Abandonment Integrated Services. The tenure of the umbrella contract is 2 years from 29 March 2018 to 29 March 2020, with an extension option period of 1 year.

HLIB’s VIEW

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. Maintain forecast.

Maintain HOLD, TP maintained at RM1.46. Maintain HOLD with unchanged TP of RM1.46 pegged to unchanged FY18 PER of 12x. 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.

Source: Hong Leong Investment Bank Research - 30 Apr 2018