Analysts positive on Uzma’s first fishing contract win

KUCHING: Analysts are generally positive on Uzma Bhd’s subsidiary Uzma Engineering Sdn Bhd ( Uzma Engineering) being awarded its first fishing contract win from Petronas Carigali Sdn Bhd ( Petronas Carigali).

In a press release posted on Bursa Malaysia, Uzma revealed that Petronas Carigali awarded Uzma Engineering a contract for the provision of fishing equipment and services.

“This contract will run for a duration of two years, commencing from February 2017 to February 2019, with an extension option of one year ( two plus one years) for fishing services across Petronas Carigali’s area of operations,” the group said.

According to the research arm of Kenanga Investment Bank Bhd ( Kenanga Research), this is the fourth contract secured announced this year.

Kenanga Research was positive on the contract win as it shows the ability of Uzma to expand the company’s product offerings into areas traditionally dominated by foreign players.

“Fishing services are normally performed to remove stray equipment that has fallen into the well,” the research arm said.

“Such services are able to complement its newly secured wireline jobs as well as its HWU services.”

It added that the contract value remains uncertain at this juncture, depending on work orders to be issued.

Meanwhile, the research arm of Public Investment Bank Bhd ( PublicInvest Research) noted that the execution of the contract depends on work orders to be issued to Uzma when services are required.

PublicInvest Research therefore maintained that the research arm’s orderbook replenishment assumptions of circa RM70 per year at this juncture has sufficiently provided for this contract.

“We are encouraged that Uzma’s activities pick- up is a signal of recovery for the group, reaffirmed by a slew of new awards which the group has secured to- date in 2017,” the research arm said.

PublicInvest Research thus maintained its ‘outperform’ call on Uzma.

“The group’s performance continues to be supported by its circa RM2.6 billion orderbook and tenderbook of circa RM2 billion to last up to 2019,” it added.

On the other hand, as no firm contract value was provided, Kenanga Research made no changes to its earnings forecast.

The research arm believed that such contract could fetch earnings before interest and tax ( EBIT) margins ranging from 10 to 20 per cent depending on the work scope and complexity of the jobs.

“Uzma is likely to lease the relevant equipment to perform the services and hence no substantial capital expenditure ( capex) layout is expected,” it said.

Kenagna Research also observed that Uzma’s earnings recovery in FY17 remained intact, backed by RM2.6 billion order- book.

“Current net gearing stands at 1.1- fold and Uzma has no intention to raise new funding unless for new major contract win this year,” the research arm said.

All in, Kenanga Research kept its ‘ market perform’ call on the stock.