Uzma received a contract extension from PETRONAS Carigali for the provision of Coiled Tubing and Services for a duration of two years, valued at RM230m. Incidentally, the amount is 15% higher (+RM30m) compared to the previous extension. We are positive on this contract win as it validates our outlook for Uzma as a key beneficiary of increasing brownfield activities especially on production enhancement and decommissioning activities. The upward revision in contract value also signals a more optimistic view on Uzma on the back of stable oil price above USD80/bbl. We raise FY23-25F EPS by 12%-15% to account for this contract. We maintain our Outperform call with a higher TP of RM0.80 (from RM0.71) based on 10x PER over an increased CY23 EPS.

• The contract is a 2nd extension after the first one was awarded on 24th November 2020. The contract is valued at RM230m for a similar period of 2 years from 1st December 2022 until 30th November 2024. Assuming equal revenue recognition and blended net profit margin of 5.5%, the contract is expected to have positive impact to its bottom-line amounting to about RM6.4m per year.
  The contract also entails an upward revision in the value by 15% or RM30m from the previous extension in December 2020. We raise our FY23-25F estimates by 12%-15% to account for this win, and assumptions of more contract wins ahead.
• Growing orderbook. Based on our checks, Uzma’s current orderbook is now at c.RM2.2bn after it secured works amounting to RM40m and RM230m in January 2023. We expect it to keep its momentum in securing more contracts in the near future on the back of its >RM1bn tenderbook.
• Raising TP to RM0.80. This contract extension validates our view on the Group’s positive outlook in securing more brownfield activities mainly for production enhancement and decommissioning activities over the next 3 years, as guided in PETRONAS Activity Outlook 2023-2025. This is also supported by positive sentiment on the sector and steady oil prices at above USD80/bbl. We maintain our Outperform call though with a higher TP of RM0.80 (from RM0.71) based on 10x PER over an increased CY23 EPS.

Source: PublicInvest Research - 31 Jan 2023