News

Last Friday, UZMA announced that it has been awarded a contract for Leasing, Operation and Maintenance of the D18 Water Injection Facility from Petronas Carigali. 

Duration of the contract is for five years effective from 31st March 2016 with contract value ranging between RM350m-RM400m.

Comments

This is expected as it has been eyeing this contract for quite some time now. To note, the group had earlier proposed a

We believe the exercise is the prerequisite for the group of securing this water injection job to fund the CAPEX for the

A job win under the current low oil price scenario is always a positive and it is also a milestone for the company as this is

It will also provide recurring earnings for the group to cushion the volatility of its other income streams with expected RM70m-RM80m top line and RM10.5m-RM12.0m EBIT (assuming 15% EBIT margin in-line with its existing business)

Outlook

The group’s prospects remain intact despite low oil prices due to the maintenance nature for most of its services. Year-to-date, it has secured RM325.5m worth of projects relating to oilfield intervention and support services. This shows that oilfields still require maintenance activities namely well interventions and inspection to maintain its oil production amid yearly natural production decline.

MMSVS, its Thai-based Hydraulic Workover Unit (HWU) subsidiary is expected to experience high growth in the coming years upon UZMA’s acquisition and thus enabling it to ride on UZMA’s business network in SEA to capture a bigger slice of the oilfield work over market in the region.

It will also bring an additional dimension to UZMA’s oilfield services business segment making UZMA a one-stop oilfield services provider in Malaysia.

Forecast

We maintain our forecasts for now.

Rating

Maintain MARKET PERFORM

Valuation

Our Target Price is maintained at RM2.58 based on an unchanged 11.0x CY16 PER.

Risks to Our Call

(i) Higher-than-expected capex requirements could see further rise in gearing, (ii) Contractual and project execution