The weaker earnings came within expectations, amidst slower activity levels and delayed jobs. Nonetheless, given UZMA’s unique position in the sector, the group is expected to benefit from the recovery of brownfield activities going forward. The group has also put in place long-term plans to diversify into non-oil and gas businesses. Maintain OP with higher TP of RM0.83.

1HFY21 within expectations. 1HFY21 core net profit of RM12m came in within expectations at 47% of our, and 54% of consensus, full-year forecasts. No dividends were announced, as expected.

Overall weaker results. QoQ, 2QFY21 core net profit of RM5.5m decreased 17%, on the back of lower activities. More notably, its renewable energy projects contributed minimally during the quarter (as compared to 6% of revenue in the previous quarter), as jobs at hand were completed in the same quarter. Cumulatively, 1HFY21 earnings also dropped 25% YoY, amidst lower activities and delayed jobs.

To benefit from increased brownfield upstream activities. While the recovery of the oil and gas sector is still expected to be slow and gradual, UZMA will be able to benefit from the rebound in brownfield activities going forward, given its unique position within the market. UZMA has also put in place long-term plans of diversifying beyond the oil and gas sector, and venture into growth areas such as renewable energy, and digital and technology.

Maintain OUTPERFORM, with slightly higher TP of RM0.83 (from RM0.80 previously), following some minor updates post-results, pegged to unchanged valuations of 0.5x PBV – close to roughly -1.5SD below its mean. No changes to our FY21-22E earnings forecasts.

Risks to our call include: (i) lower-than-expected activity levels, (ii) slower-than-expected order-book recognition, (iii) cost overruns.

Source: Kenanga Research - 25 Feb 2021