Journey to Wealth
UMW Holdings - Secures contract from PetroVietnam
News UMW Standard Drilling Sdn Bhd (UMWSD), a wholly owned unit of UMW Holdings has secured a contract from PetroVietnam Drilling & Well Services Corporation (PV Drilling).
UMW would provide the Naga 2 rig and related drilling services to PetroVietnam Drilling to drill wells for the end client, Hoang Long Joint Operating Company. The UMWSD-PV Drilling contract is for a duration of six months with an option for another six months.
NAGA 2 is a premium independent-leg cantilever jack-up rig that has a drilling depth capability of 30,000 feet and has a rated operating water depth of 350 feet.
Comments At the moment, NAGA 2 is operating in Indonesia, serving its contract with HESS (Indonesia-Pangkah) Limited, which is expected to end in April 2013.
Based on UMW's press release, NAGA 2 will be moved to the Vietnam waters in May 2013 after completing its contract in Indonesia.
Outlook We expect UMW Toyota and Perodua to retain their leadership in the non-national and national passenger car segments respectively.
Re-rating catalysts would include: (i) stronger-than expected vehicle sales and (ii) the listing of its Oil & Gas unit.
Forecast There were no financial details revealed in the press release. As such, we are leaving our FY13-14 forecasts unchanged for now pending further guidance from management. However, based on NAGA 3's charter rate of USD145k/day (which was obtained in 2012) and the short duration of 6 months, we expect the profit contribution to be small.
Rating Maintain MARKET PERFORM
We are maintaining our MARKET PERFORM rating on the stock at this juncture even though the share price has already rallied above our target price. However, our target price is currently under review for a possible upgrade on valuation grounds.
Valuation Our target price of RM12.37 which is based on 14.0x FY13 EPS is currently under review. At the moment, the PE multiple of 14.0x applied on UMW is lower than the auto sector's peers' average range of 15.5x-16.0x.
Risks Uncertainty from the upcoming General Election may weaken consumer sentiments.
Source: Kenanga
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