UZMA was awarded a one-year work order from SEA Hibiscus for the provision of integrated well services. While the value of the job is rather smallish (guesstimated ~RM15- 20m), we are positive on the job win nonetheless, reflecting UZMA’s bidding competencies. The group is confident in more wins moving forward from its bid-book of ~RM1.5b to further bolster its current firmed order-book of RM1.3b. Maintain OP with TP of RM0.64.

Awarded new work order. UZMA received a letter of award dated 20 Nov 2020 from SEA Hibiscus Sdn Bhd for a work order for the provision of integrated well services for intervention, workover and abandonment. The work order is part of a Pan Malaysia umbrella contract for Petroleum Arrangement Contractors (PACs). Duration of the work order is for one year.

Positive on the award. While the value of the work order was not disclosed, we guesstimate it to be somewhere around RM15-20m. Despite the rather smallish value (contributes to roughly 3-4% of our FY21E revenue), we are positive on the award nonetheless. This shows UZMA’s capabilities in securing opportunities in the market even during the current challenging climate. Gross margin from the contract is expected to be roughly at 30-35% - in line with the group’s average.

Further new wins to come. Currently, the group’s bid-book stands at RM1.47b. Management is targeting for its bid-book to grow to RM2.9b in the coming months, as it is in preparation of submitting an additional RM1.43b worth of bids. We are encouraged by this, as this signals the presence of opportunities despite the challenging environment. Of the submitted bids, management guides that roughly half has a 70% chance or better at winning. Any additional wins from here will further bolster its current firmed order-book at hand of RM1.3b.

Maintain OUTPERFORM, with unchanged TP of RM0.64, pegged to 0.4x PBV on FY22E BVPS at -1.5SD below mean. No changes to our FY21-22E earnings as we believe our assumptions have already more than encompassed this work order given its rather smallish value (<2% of its order-book).

Our OUTPERFORM call is premised on UZMA’s recovery play. Being an integral upstream services provider, any factors leading to an increase in oil demand (e.g. positive news flow on Covid-19 vaccine developments) will bode well for the stock’s trading sentiment.

Risks to our call include: (i) lower-than-expected margins, (ii) slower- than-expeced order book replenishment, and (iii) cost overruns.

Source: Kenanga Research - 2 Dec 2020