UZMA (7250) - Uzma - Another milestone contract
Target RM0.70 (Stock Rating: HOLD)
Uzma’s success in securing the Petronas Carigali contract to provide through tubing downhole tools and services is another milestone for the group’s well services segment and a testimony to its ability to compete with international oil & gas firms. The contract will contribute positively to the group’s earnings in FY15-16, with potential extension into FY17. We make no changes to our FY14-16 EPS forecasts and target price, still based on 10.5x CY16 P/E (at a 30% discount to the oil & gas big caps). We reiterate our Add call. The start of production at Tanjung Baram marginal field is a potential re-rating catalyst.
What Happened
Uzma’s wholly-owned subsidiary Uzma Engineering Sdn Bhd (UESB) was recently awarded a Petronas Carigali Sdn Bhd contract for the provision of through tubing downhole tools and services. The contract period is two years, effective from 1 Jan 2015 to 31 Dec 2016, with an extension option of one year from 1 Jan 2017 to 31 Dec 2017. The value of the contract over the primary period is estimated at RM50m.
What We Think
The contract award was not a surprise to us, as Uzma is always looking for opportunities to offer new services in order to increase its capabilities in the well services segment. We expect the contract to contribute positively to group revenue and earnings in FY15-16, and possibly FY17. The contract marks another milestone for Uzma in the well services segment, which was dominated by international oil service companies in the past. We believe that the contract, which falls under Uzma’s slickline services offered by its drilling and well services (DWS) segment, is further proof of the group’s capabilities. In the past, only international oil & gas services firms offered through tubing downhole tools and services. As for risk, the project could become unfeasible economically if crude oil price dips below US$25-30 per barrel, which we believe is highly unlikely in the foreseeable future.
What You Should Do
Accumulate the stock. We expect Uzma’s DWS and project oilfield & optimisation services (POOS) divisions to benefit from the current low oil price environment, as producers step up efforts to maximise production at their existing oilfields. Its Tanjum Baram marginal field is expected to commence oil production in 2Q15. This should provide a new source of recurring income for Uzma and set the stage for a record earnings performance in FY15.
Source: CIMB Daybreak - 19 January 2015
Target RM0.70 (Stock Rating: HOLD)
Uzma’s success in securing the Petronas Carigali contract to provide through tubing downhole tools and services is another milestone for the group’s well services segment and a testimony to its ability to compete with international oil & gas firms. The contract will contribute positively to the group’s earnings in FY15-16, with potential extension into FY17. We make no changes to our FY14-16 EPS forecasts and target price, still based on 10.5x CY16 P/E (at a 30% discount to the oil & gas big caps). We reiterate our Add call. The start of production at Tanjung Baram marginal field is a potential re-rating catalyst.
What Happened
Uzma’s wholly-owned subsidiary Uzma Engineering Sdn Bhd (UESB) was recently awarded a Petronas Carigali Sdn Bhd contract for the provision of through tubing downhole tools and services. The contract period is two years, effective from 1 Jan 2015 to 31 Dec 2016, with an extension option of one year from 1 Jan 2017 to 31 Dec 2017. The value of the contract over the primary period is estimated at RM50m.
What We Think
The contract award was not a surprise to us, as Uzma is always looking for opportunities to offer new services in order to increase its capabilities in the well services segment. We expect the contract to contribute positively to group revenue and earnings in FY15-16, and possibly FY17. The contract marks another milestone for Uzma in the well services segment, which was dominated by international oil service companies in the past. We believe that the contract, which falls under Uzma’s slickline services offered by its drilling and well services (DWS) segment, is further proof of the group’s capabilities. In the past, only international oil & gas services firms offered through tubing downhole tools and services. As for risk, the project could become unfeasible economically if crude oil price dips below US$25-30 per barrel, which we believe is highly unlikely in the foreseeable future.
What You Should Do
Accumulate the stock. We expect Uzma’s DWS and project oilfield & optimisation services (POOS) divisions to benefit from the current low oil price environment, as producers step up efforts to maximise production at their existing oilfields. Its Tanjum Baram marginal field is expected to commence oil production in 2Q15. This should provide a new source of recurring income for Uzma and set the stage for a record earnings performance in FY15.
Source: CIMB Daybreak - 19 January 2015
