Uzma Bhd - 1H12 within expectations

Period  2Q12/1H12

Actual vs. Expectations

Uzma Bhd’s (“UZMA”) 2Q12 net profit of RM5.3m brought its 1H12 net earnings to RM10.3m. This is the 8th consecutive quarter of profits since its turnaround in 3Q10.

The commendable set of 1H12 net earnings were within expectations and made up 45% and 44% of the street’s estimate and our forecast of RM22.3m and RM22.8m respectively.

Dividends           No dividend was declared as expected.

Key Results Highlights

QoQ, the 2Q12 net profit rose by 10% from RM4.8m in 1Q12, on the back of revenue growth of 26% to RM69.9m, from RM55.3m previously, and also operating profits of RM6.9m (+23% QoQ) posted by all its business segments. Net margin was marginally lower QoQ by 1%, which we believe this may due to the kicked-started of the RM350m 5-year Petronas Drilling Programme in 2Q12.

YoY, the 2Q12 net profit surged by 85% from RM2.9m in 2Q11, led by a 75% growth in revenue (from RM40.0m in 2Q11). The growth in business was mainly due to UZMA having secured a few sizable long term contracts from oil majors with a total of RM720m since 2Q11.

YTD, the 1H12 net income doubled to RM10.1m from RM4.9m registered in 1H11. This was on the back of a 57% hike in revenue to RM125.2m from RM75.2m in 1H11, including the positive contribution from its new JCE – Setagap Venture Petroleum (SVP). Out of the RM10.1m, SVP contributed RM1.6m of the 1H12 earnings.

Outlook

We believe that UZMA is set to deliver a stronger 2H12 as two additions of UzmAPRES (7th and 8^th units) are scheduled to be deployed in the near term. The 7th unit is remobilized to be an alternative platform as the initial platform faced technical challenges.

Additionally, SVP’s 1H12 earnings contribution is well on track as its annualised earnings contribution is expected at RM3.6m for FY12.

Change to Forecasts       Maintaining our FY12-14E RM22.3m-RM34.0m

Rating   MAINTAIN OUTPERFORM

Valuation            We are upgrading our target price to RM2.04 (RM1.70 previously) based on 9.0x PER on our FY13E EPS estimate of 22.7 sen. The higher implied PER (vs. 7.5 previously) is supported by the group’s sustainable profits recovery trend

Risks

Delays in the deployment of its upcoming UzmAPRES units due to client’s requests.

Declining global crude oil price trend that will discourage O&G activities.

Source: Kenanga