• Uzma has secured a 3-year drilling cementing services contract from Philippine Geothermal Production Company
   
• The contract is estimated at RM30m, bringing YTD wins to RM690m and boostingthe order book to RM2.9bn
   
• Uzma has secured a 3-year drilling cementing services contract from Philippine Geothermal Production Company § The contract is estimated at RM30m, bringing YTD wins to RM690m and boosting the order book to RM2.9bn § Maintain BUY rating with RM1.78 target price (based on 12x PE multiple on FY25E EPS)

Secured a Contract From Philippine Geothermal Production Company

Uzma announced that it secured a well-services contract with the Philippine Geothermal Production Company (PGPC) to provide drilling and cementing services for its geothermal fields in the Philippines. PGPC operates the Tiwi geothermal steam field in the province of Albay and the Mak-Ban geothermal steam field in the provinces of Laguna and Batangas. The contract is for three years and expires on 31 August 27.

Maiden Longer-term Contract From PGPC

We estimate this contract to be valued at RM30m. Assuming a group blended PATAMI margin of 8–9%, we expect this contract to contribute c.RM1m over FY25-27E, comprising 2% of our current projected earnings. We gather that PGPC had previously awarded Uzma with a contract with a <1-year duration; however, this maiden 3-year long-term contract reflects the client’s confidence in Uzma’s capabilities in delivering well services, in our view. YTD contract wins at RM690m, bring its latest order book to RM2.9bn as of Oct 24.

Reiterate BUY With RM1.78 Target Price

We have made no changes to our earnings forecast; this contract falls under our annual replenishment assumption. We expect the strong momentum in contract flow to continue through to FY25, supported by its enormous tender book of RM5.5bn. We remain positive on Uzma’s earnings prospects, driven by increased offshore activity, the commencement of the LSS4 project, and healthy order book visibility. We reiterate our BUY rating and RM1.78 target price based on an unchanged 12x PE multiple on FY25E EPS. Key risks to our BUY call include lower-than-expected work orders from customers, unforeseen project delays, and escalation in project execution cost

Source: Phillip Capital Research - 28 Oct 2024