UMW Holdings; Hold
Price Target: RM12.70; UMWH MK

UMW clinched a USD157.7m (c.RM473m) contract from Petronas Carigali (PC) for the provision of UMW’s jack-up drilling rig, Naga 4, on PC’s domestic operations. The duration of the contract is three years with an additional two year renewal option.

The contract translates into day rate of approximately RM438k (based on USD1.00:RM3.00) which is within our expectation and FY13F-15F earnings forecast. We forecast FY13-15F O&G division turnover of RM1.7bn- RM2.1bn with about 8% full-year contribution from Naga 4 (about 4% for FY13). Naga 4 was delivered on February 2013.

We are positive on the contract as it reaffirms UMW’s long-term prospects in the oil & gas business. Being among the few domestic rig operators in Malaysia, we believe the group is poised to secure more contracts on the back of robust domestic demand for rigs. Despite the opportunities in oil & gas, we believe the Group’s positives has been priced in with its strong share price gain in the last year. We maintain our Hold recommendation.

Source: HwangDBS Research - 11 Apr 2013