UZMA had been awarded a water injection contract for the Sepat platform from Petronas Carigali, with a 30-month period which carries a value of ~RM27m. Overall, we are positive on the contract win, demonstrating Petronas’ reliance on UZMA’s expertise, although the smallish contract value would be largely inconsequential to the company’s order book of ~RM2b. Maintain MP with TP of RM0.67.

Awarded contract from Petronas Carigali. UZMA announced that it had received a letter of award from Petronas Cargali for the provision of a portable water injection module (PWIM) for the Sepat platform. Scope of the contract includes design, engineering, procurement, fabrication, installation, hook-up, commissioning, operating and maintenance of the PWIM at the Sepat platform. The contract will expire 30 months after first water injection, and carries a value of approximately RM27m over the contract period.

Positive on the contract win. We are positive on the contract award, especially considering the current challenging backdrop plaguing the oil and gas sector, with Petronas having recently announced a cut in capex and opex budget. Nonetheless, this also demonstrates Petronas’ reliance on UZMA’s expertise. The award is the company’s sixth publically announced contract win in FY20, bringing YTD firm-value wins to ~RM199m. However, considering the smallish value of the contract, it would be largely inconsequential to the company’s total order-book of ~RM2b. We expect the contract to fetch roughly ~30% gross margins (in-line with company’s average).

Maintain MARKET PERFORM, with unchanged TP of RM0.67, pegged to 0.4x FY21E PBV on at -1.5SD below its 5-year mean. No changes to our FY20-21E numbers for the time being, considering the smallish size of the contract. Keen investors should be wary of the upcoming weaker results, given operational disruption led by the Covid-19 and lower oil prices, and thus should adopt a nimble trading strategy or be prepared to weather through a period of volatility.

Risks to our call include: (i) lower-than-expected margins, (ii) slower than-expected order-book recognition.

Source: Kenanga Research - 24 Jun 2020