Period  3Q13/9M13

Actual vs. Expectations Uzma’s 3Q13 net profit of RM9.1m brought its 9M13 net profit to RM27.0m which is within both our (RM36.6m) and the consensus (RM35.2m) expectations, at 73.9% and 75.7%, respectively.

Dividends  No dividend was declared as expected.

Key Results Highlights

 QoQ, the 3Q13 net profit growth was flat despite an increase in revenue (+8.1%) largely due to the strong performance of its associate (Setegap Ventures’ operations) earnings in 2Q13 versus the current quarter.

 YoY, as expected, the net profit growth was significantly higher (+60.3%) due to the stronger revenue (+30.0%) on the back of higher UzmaPres units and the better performance of its GRE, wireline and MECAS services. Higher associate earnings also helped to bump up the current year’s numbers.

Outlook  UZMA’s services division is expected to grow steadily due to higher UzmaPres units and better wireline and well services take-up rate as Uzma continues to build up its track record in this space.

 Chances for RSC wins are strong given that Uzma was a participant in the early studies for some of the marginal fields, giving its in-depth knowledge, which should have strengthened its tender proposals.

 Further possible game-changer is the successful participation in any of the Chemical Enhanced Oil Recovery (CEOR) projects.

Change to Forecasts

 Given that earnings are within expectations, we are maintaining our FY13 and FY14 forecasts.

Rating Maintain OUTPERFORM

Valuation  We believe the sustained share price performance of UZMA is attributable to the market’s anticipation of UZMA securing RSCs in the near-term.

 On expectations of continuous positive news-flow and the fact that UZMA could be moving higher up the upstream segment coupled with the shares illiquidity, we are raising our target PER to 15x (from 13x previously).

 This raises our TP to RM5.28 (from RM4.57).

Risks to Our Call A sustained decline in global crude oil price may discourage O&G activities and cause delays in UzmaPres deployments within the year.

Source: Kenanga