• Uzma was awarded an extension from Petronas Carigali for the provision of coiled tubing equipment and services at offshore East Malaysia
• The contract, valued at RM100m with a duration of 1 year, marks the third extension from Petronas Carigali
• Maintain BUY rating with RM1.45 target price

Secured contract extension from Petronas Carigali

Uzma has announced that its subsidiary, Setegap Ventures Petroleum Sdn Bhd (SVP), has secured a contract extension worth RM100m from Petronas Carigali Sdn Bhd (PCSB). The scope of work includes providing coiled tubing equipment and services for PCSB’s offshore oilfield in East Malaysia. The extension is for 1 year, commencing on 1 Dec 24 and expiring on 30 Nov 25.

Third contract extension

This contract award marks the third extension from PCSB. Initially awarded in Nov15 with a 5-year tenure, the contract was extended in Nov20 and Dec22, each time for an additional 2 years. We gather that the service rates for this latest extension are comparable to the previous 2-year extension valued at RM230m. Assuming a group blended PATAMI margin of 8-9%, we estimate this contract will contribute c.RM8-9m, accounting for c.9%/5% of our FY25/FY26 earnings forecast. We view this contract positively as it underscores PCSB’s confidence in Uzma’s ability to deliver coiled tubing services reliably. This contract win also brings Uzma’s latest order book to RM3.1bn.

Reiterate BUY with RM1.45 target price

We make no changes to our earnings forecast as this contract falls under our assumption. We expect Uzma’s strong earnings momentum to sustain into FY25, driven by the commencement of its LSS4 project, pick-up in O&G activities, and its sizeable order book. We reiterate our BUY rating and RM1.45 target price based on 10x PE on FY26E EPS. Uzma is currently trading at an attractive 5x forward FY26 PE. Key risks include lower-than-expected work orders from customers, unforeseen project delays, and escalation in project execution costs.

Source: Phillip Capital Research - 13 Jan 2025