UZMA (7250) : Uzma - A boost to its CTU business
Target RM3.81 (Stock Rating: ADD)
Uzma’s acquisition of a bigger equity interest in its associate Setegap Ventures Petroleum will allow it to better participate in a growing and profitable company, and complements its integrated drilling and well services. We expect SVP’s VDP status for the provision of CTU services for Petronas Carigali’s East Malaysia operations will lead to more contracts and sustainable growth. We reiterate our Add recommendation and target price, valuing the stock at 14.8x CY16 P/E, a 30% discount to the O&G big caps, consistent with our O7G small cap valuations. Catalysts are expected from this news. Expect more acquisitions in 2015 as the group continues to grow.
What Happened
Uzma’s wholly-owned subsidiary Tenggara Analisis Sdn Bhd has proposed to acquire a 18.98% equity interest in Setegap Ventures Petroleum Sdn Bhd (SVP) for a total purchase consideration of RM28.5m. SVP is currently a 30.02% associate of Uzma, and upon completion of the acquisition, Uzma will hold a total 49% equity interest in SVP. The RM28.5m purchase consideration is going to be satisfied via cash payment of RM17m and issuance of 5.35m new ordinary shares of Uzma at as issue price of approximately RM2.1495 per share. The proposed acquisition is expected to be completed by 1Q15.
What We Think
We are positive on the news. Based on SVP’s 9M15 annualised PAT of RM16.5m, the purchase price implies a purchase valuation of 9.1x FY14E P/E, which we believe is fair. SVP is a service provider in the oil and gas (O&G) industry, specialising in well pumping, coiled tubing (CTU), and cementing services. These specialised services would complement Uzma’s offerings especially for its drilling and well services (DWS) business. The proposed acquisition represents an opportunity to increase its equity interest in a growing and profitable company in the O&G sector. Since 2011 to 2013, SVP has managed achieve a31% PAT CAGR. In November 2014, SVP was awarded a 5-years Vendor Development Program (VDP) status for the provision of its CTU services for PETRONAS Carigali Sdn Bhd’s East Malaysia operations. We expect this status will enable SVP to secure more service contracts in East Malaysia in the next few years.
What You Should Do
Accumulate the stock. With a comprehensive services offering to cater to the well services offered to the O&G operators for production enhancement, we believe Uzma will be able to achieve a strong growth rate in the next few years.
Source: CIMB Daybreak - 08 December 2014
Target RM3.81 (Stock Rating: ADD)
Uzma’s acquisition of a bigger equity interest in its associate Setegap Ventures Petroleum will allow it to better participate in a growing and profitable company, and complements its integrated drilling and well services. We expect SVP’s VDP status for the provision of CTU services for Petronas Carigali’s East Malaysia operations will lead to more contracts and sustainable growth. We reiterate our Add recommendation and target price, valuing the stock at 14.8x CY16 P/E, a 30% discount to the O&G big caps, consistent with our O7G small cap valuations. Catalysts are expected from this news. Expect more acquisitions in 2015 as the group continues to grow.
What Happened
Uzma’s wholly-owned subsidiary Tenggara Analisis Sdn Bhd has proposed to acquire a 18.98% equity interest in Setegap Ventures Petroleum Sdn Bhd (SVP) for a total purchase consideration of RM28.5m. SVP is currently a 30.02% associate of Uzma, and upon completion of the acquisition, Uzma will hold a total 49% equity interest in SVP. The RM28.5m purchase consideration is going to be satisfied via cash payment of RM17m and issuance of 5.35m new ordinary shares of Uzma at as issue price of approximately RM2.1495 per share. The proposed acquisition is expected to be completed by 1Q15.
What We Think
We are positive on the news. Based on SVP’s 9M15 annualised PAT of RM16.5m, the purchase price implies a purchase valuation of 9.1x FY14E P/E, which we believe is fair. SVP is a service provider in the oil and gas (O&G) industry, specialising in well pumping, coiled tubing (CTU), and cementing services. These specialised services would complement Uzma’s offerings especially for its drilling and well services (DWS) business. The proposed acquisition represents an opportunity to increase its equity interest in a growing and profitable company in the O&G sector. Since 2011 to 2013, SVP has managed achieve a31% PAT CAGR. In November 2014, SVP was awarded a 5-years Vendor Development Program (VDP) status for the provision of its CTU services for PETRONAS Carigali Sdn Bhd’s East Malaysia operations. We expect this status will enable SVP to secure more service contracts in East Malaysia in the next few years.
What You Should Do
Accumulate the stock. With a comprehensive services offering to cater to the well services offered to the O&G operators for production enhancement, we believe Uzma will be able to achieve a strong growth rate in the next few years.
Source: CIMB Daybreak - 08 December 2014
