We are positive on the first fishing contract win as it shows the ability of the company to expand its product offerings to areas traditionally dominated by foreign players. The contract also complements its newly secured wireline jobs as well as its HWU services. No changes to our earnings estimates. All in, we keep our MARKET PERFORM call on the stock with an unchanged TP of RM1.81 pegged to 1.1x FY17E PBV.

First fishing services job. Yesterday, UZMA received approval from Petronas Carigali Sdn Bhd (Petronas) for a press release in relation to the award to Uzma Engineering Sdn. Bhd., a wholly- owned subsidiary, a contract for the provision of fishing equipment and services. The Contract will run for a duration of two years, commencing from February 2017 to February 2019, with an extension option of another year.

Unknown contract value, still. This is the fourth contract secured announced this year. We are positive on the contract win as it shows the ability of the company to expand its product offerings into areas traditionally dominated by foreign players. Fishing services are normally performed to remove stray equipment that has fallen into the well. Such services are able to complement its newly secured wireline jobs as well as its HWU services. The contract value remains uncertain at this juncture, depending on work orders to be issued.

No changes to our earnings forecast. As no firm contract value was provided, we make no changes to our earnings forecast. We believe such contract could fetch EBIT margins ranging from 10- 20% depending on the work scope and complexity of the jobs. UZMA is likely to lease the relevant equipment to perform the services and hence no substantial capex layout is expected.

Maintain MARKET PERFORM. UZMA?s earnings recovery in FY17 remains intact backed by RM2.6b order-book. Current net gearing stands at 1.1x and UZMA has no intention to raise new funding unless for new major contract win this year. All in, we keep our MARKET PERFORM call on the stock with an unchanged TP of RM1.81 pegged to 1.1x FY17E PBV, which is equivalent to -1.0SD over the 5-year mean.

Risks to our call: (i) Weaker-than-expected recovery in O&G market, (ii) Slower-than-expected delivery in D18 Water Injection Project, and (iii) Lower-than-expected margins.

Source: Kenanga Research - 23 Mar 2017