News Last Friday, Uzma Bhd (UZMA) announced that it has secured a contract for the provision of Through Tubing Downside Tools and Services from Petronas.
Contract period will last for 2 years effective from 1st Jan 2015 to 31 December 2016 with an extension option of 1 year.
Value of the contract is estimated at RM50.0m.
Comments Positive on the win as it is another service that UZMA can render within the well maintenance segment, and to none other than Petronas Carigali.
Whilst project timeline is uncertain (within the 2 years), management guides that the risk of such projects being uneconomical will only be if crude oil price dips further below USD25-30/barrel.
Hence, should Brent prices stabilize at USD50/bbl, work will continue.
Outlook UZMA’s business could slow down in FY15, given Petronas’ potential OPEX cuts (on top of CAPEX cuts announced previously). However, we are banking onUZMA’s innovative and entrepreneurial spirit to keep earnings growth intact.
Drilling for its RSC is still expected within 1Q15.
Uzma’s order book stood at RM1.8b (as at end-2014) whilst bids are at RM2.8b.
Forecast We maintain our forecasts for now but will closely monitor earnings trend for FY15.
Rating Maintained at OUTPERFORM
Valuation Our TP is maintained at RM2.02 pegged to 9.0x FY15E forward PER, which is in-line with small cap O & G peers’ valuations.
Given that UZMA’s share price has fallen significantly in the past few months, we believe value is emerging with its forward FY15E PER at 7.7x, implying that the market might had been overly pessimistic on the stock.
Risks to Our Call (i) Lower-than-expected margins and O&G activities; (ii) delay in first-oil of the RSC, and (iii) no-go for MMSVS acquisition.
Source: Kenanga
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