News Yesterday, Uzma Bhd (“UZMA”) announced that
its subsidiary company, Malaysian Energy Chemicals & Services Sdn Bhd
("MECAS") had received a contract worth around RM62.0m from Talisman Malaysia
Limited.
The said contract,
which had already started from 6th July 2012, is to supply chemical
and related services for a primary period of five years with four extension
options thereafter of one year each (5+1+1+1+1).
The value of RM62.0m
is anticipated for the first five year primary term.
Comments We are
positive on the news as this is the first ever contract that UZMA signed with
Talisman (for a contract period of 5 years).
With an annual
revenue recognition of RM12.4m, this contract forms part of the replenishment contract
for the company’s order book, which stands at c.RM1.0b currently.
The company is
expecting a yearly lean income of RM1.24m from this contract at a 10% net
margin. This makes up a total net earnings of RM6.2m from the contract for five
years.
We are thus expecting a net profit contribution of RM0.62m
for FY12E and RM1.24m each year for FY13-14E. However, these are already
factored into our earlier estimates as part of our assumed annual order book
replenishment of RM150m.
If the contract is to
run for 9 years (5+1+1+1+1), the total contract value would be approximately RM111.6m
with a total net earnings contribution of RM11.2m.
Outlook We
remain optimistic on the company as UZMA continues to be actively engaged in
the domestic Oil & Gas production through the provision of its value-added
services.
The upcoming 2H12
results are expected to in line with ours and the market consensus as its 6th
unit of UzmAPRES has been deployed
recently.
Forecast We are
keeping our FY12-14E net earnings unchanged at RM22.3m-RM34.0m.
Rating MAINTAIN OUTPERFORM
Valuation We
are reiterating our OUTPERFORM recommendation with the target price unchanged at
RM1.70, based on 7.5x its FY13E EPS of 22.7 sen.
Risks Declining global crude oil price trend that
will discourage O&G activities.
Source: Kenanga
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