Analysts positive on Uzma-Aerosun’s joint venture for pipes

KUCHING: The research arm of Kenanga Investment Bank Bhd (Kenanga Research) is positive on Uzma Bhd’s Joint-Venture (JV) with Aerosun (Hong Kong) Co Ltd (Aerosun HK) and individual shareholder Gameladha Nasiriffin Bin Arifin.

The purpose of the JV is to provide the activities of engineering, procurement, construction, installation and commission of non-metallic pipes in Malaysia via specially created vehicle aptly named - Aerosun Uzma Malaysia Sdn Bhd (Aerosun Uzma) which was formed on January 18.

“We are positive on this JV as it intends to offer new products, non-metallic pipes to its clients, demonstrating its ability to innovate and adapt amidst a challenging environment,” Kenanga Research said in a company update yesterday.

The research arm went on further to highlight that they have gathered that, Aerosun Uzma will propose the aforementioned products and services offerings to Petronas on existing fields and new projects in order to achieve further cost savings.

“Should such products succeed in being utilised locally, we do not discount the possibility of Uzma eyeing more similar jobs within the region,” opined the research arm.

However, as the JV company has yet to secure any contracts, the research arm will be maintain its earnings forecast on the company as they do not factor any earnings contribution from the JV at this juncture.

Looking towards Uzma’s current contracts, its Tanjong Baram Risk Service Contract’s ( RSC) earnings contribution is expected to be minimal in fiscal year 2016 (FY16) due to the fact that most of the cash received from oil barrels lifted are used to offset operating expenditures (opex) and the recouping of its capital expenditure (capex).

Meanwhile, its previously awarded contract from Petronas Carigali Sdn Bhd ( PCSB) to lease, operate and maintains the D18 Water Injection Facilitiy ( WIF) off shore of Sabah has already begun operations and is expected to contribute to earnings in the fourth quarter of 2016 (4Q16).

The estimated contract value of this project is RM350 million to RM400 million with a duration of five years.