News Yesterday, Uzma Bhd (“UZMA”) announced that
its wholly-owned subsidiary company, Uzma Engineering Sdn Bhd
("UESB") had been awarded a RM36.0m water injection studies contract
from PETRONAS Carigali Sdn Bhd ("PCSB").
The said contract is
an Enhanced Oil Recovery (EOR) related project for a primary period of three(3)
years (completion in May 2015) with an extension option of one (1) year (to end
by May 2016) for the provision of integrated water injection studies.
Comments We
understand that this studies contract fetches relatively thin profit margin as
this project is meant to provide a pilot project service to PETRONAS’ entities
with hope to entice more substantial contracts in the future just like the way UZMA
initially launched its flagship product, UzmAPRES, earlier.
This is part of the
replenishment contract for its orderbook, which stands at c.RM1.0b currently.
For this water
injection studies contract, the management did not reveal any further financial
guidance as the EOR development is still in the preliminary stage.
For illustration
purpose, and based on assumption of a decent net margin of 5%, we are expecting
a net profit contribution of RM0.35m for FY12E and RM1.80m and RM1.45m for
FY13E and FY14E respectively. We have earlier imputed these into our estimates.
Outlook We
remain bullish on the company as Uzma has being actively engaged in EOR, which
is the core focus of PETRONAS to boost the domestic Oil & Gas production.
Forecast We are
keeping our FY12-14E net earnings at RM22.3m-RM34.0m.
Rating MAINTAIN OUTPERFORM
Valuation We
are reaffirming our OUTPERFORM recommendation with target price unchanged at RM2.55,
supported by 7.5x of FY13E EPS of 34.0 sen.
Risks Declining global crude oil price trend that
will discourage O&G activities.
Source: Kenanga
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