Journey to Wealth
Uzma Berhad - Going strong, new RM62m contract
News Yesterday, Uzma Bhd ('UZMA') announced that its subsidiary company, Malaysian Energy Chemicals & Services Sdn Bhd ("MECAS") had received a contract worth around RM62.0m from Talisman Malaysia Limited.
The said contract, which had already started from 6th July 2012, is to supply chemical and related services for a primary period of five years with four extension options thereafter of one year each (5+1+1+1+1).
The value of RM62.0m is anticipated for the first five year primary term.
Comments We are positive on the news as this is the first ever contract that UZMA signed with Talisman (for a contract period of 5 years).
With an annual revenue recognition of RM12.4m, this contract forms part of the replenishment contract for the company's order book, which stands at c.RM1.0b currently.
The company is expecting a yearly lean income of RM1.24m from this contract at a 10% net margin. This makes up a total net earnings of RM6.2m from the contract for five years.
We are thus expecting a net profit contribution of RM0.62m for FY12E and RM1.24m each year for FY13-14E. However, these are already factored into our earlier estimates as part of our assumed annual order book replenishment of RM150m.
If the contract is to run for 9 years (5+1+1+1+1), the total contract value would be approximately RM111.6m with a total net earnings contribution of RM11.2m.
Outlook We remain optimistic on the company as UZMA continues to be actively engaged in the domestic Oil & Gas production through the provision of its value-added services.
The upcoming 2H12 results are expected to in line with ours and the market consensus as its 6th unit of UzmAPRES has been deployed recently.
Forecast We are keeping our FY12-14E net earnings unchanged at RM22.3m-RM34.0m.
Rating MAINTAIN OUTPERFORM
Valuation We are reiterating our OUTPERFORM recommendation with the target price unchanged at RM1.70, based on 7.5x its FY13E EPS of 22.7 sen.
Risks Declining global crude oil price trend that will discourage O&G activities.
Source: Kenanga
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