News Yesterday, Uzma Bhd (UZMA) announced that it has been awarded a contract by Petronas Carigali Sdn Bhd (PCSB) for the provision of Cased Hole Electric-Line Logging Perforation and other services.
This is expected to contribute positively to the group’s wire line business segment.
The contract value is RM59.0m for the period of 2 years, with the option of an additional year.
Comments This is UZMA’s 2nd win for 2015 (cumulative wins at c.RM105.0m) and we are positive as UZMA has managed to secure an upstream contract even during turbulent times (i.e. cuts in CAPEX and OPEX).
It is also a significant milestone for the company as this is the first time a local O & G services player has secured a contract of this nature (previously such contract was typically secured by international oil & gas service providers)
On p.a basis, the contract is expected to contribute c. RM5.9m to the group assuming a net margin of 20.0%; consistent with its previous wireline projects.
Outlook Whilst there is timing risk (contract is on a call-out basis), we believe significant delays in contract are unlikely given that the project will only become subeconomic if crude oil prices dips below USD25- 30/barrel, as guided by the management.
UZMA is not expected to be spared from rates negotiations by Petronas on present contracts tied to their assets.
Forecast We maintain our forecasts for now pending the release of its 4Q14 results next week.
Rating UNDER REVIEW from MARKET PERFORM
Valuation Our Target Price/call is UNDER REVIEW pending 4Q14 results release. Previous OUTPERFORM call and TP of RM2.02 is based on forward CY15 PER of 9.0x.
Risks to Our Call (i) Lower than expected margins and O & G activities, and (ii) Delay in first oil of RSC.
Source: Kenanga
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