Uzma’s three umbrella contract wins garner positive views

KUCHING: Uzma Bhd’s (Uzma) first contract wins for current year 2018 (CY18) has garnered positive views from analysts.

In a filing on Bursa Malaysia, Uzma announced that on January 9, 2018, the group obtained the approval from Petronas Carigali Sdn Bhd (PCSB) to announce that wholly-owned subsidiary Uzma Engineering Sdn Bhd (UESB) had been awarded with three umbrella contracts for the provision of electrical submersible pump (ESP) and services for PCSB.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was positive on this first contract for CY18 as these ESP-related contracts secured by Uzma are not very common in Malaysia, being dominated by established foreign players.

“Furthermore, the provision of maintenance of ESP services potentially complements its wireline and hydraulic workover unit (HWU) businesses,” Kenanga Research noted.

“That said, there is no firm value for these umbrella contracts as it depends on the work orders issued by PCSB.”

Time lines of work order and service rates were not explicitly laid out, but the research arm expected the contract to pick up in the second quarter of CY18 (2QCY18) post monsoon season.

As no firm contract value was provided, Kenanga Research made no changes to its earnings forecasts.

The research arm believed 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.

Meanwhile, the research arm of Public Investment Bank Bhd ( PublicInvest Research) believed these contracts will be financially beneficial to Uzma, and was accounted for as part of its orderbook replenishment assumptions.

PublicInvest Research remained 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 since 2017.