Uzma Bhd - OUTPERFORM - 24 May 2012

Period    1Q12

Actual vs. Expectations

 Uzma Bhd’s (“UZMA”) 1Q12 net profit of RM4.8m was in line and made up 21% and 22% of the street’s estimate and our forecast of RM22.9m and RM22.0m respectively. The profitable quarter was due to the group’s business units posting a better gross profit margin.

Dividends   No dividend was declared as expected.

Key Results Highlights

 QoQ, the 1Q12 revenue contracted by 9.0% to RM55.3m from RM60.9m, solely due to lower contributions from Geoscience & Petroleum Engineering Services (GPE) and Wireline Services (Wireline). However, the quarter net earnings rose by 23%, thanks to its newly-acquired jointly controlled entities – Setagap Venture Petroleum (SVP), which generated a RM1.0m profit. Additionally, tax expenses were RM1.0m lower than the preceding quarter of RM2.3m. 

 YoY, the 1Q12 net income surged sharply by 142% to RM4.8m from RM2.0m a year ago. This was on the back of a 57% hike in revenue to RM55.3m from RM35.1 in 1Q11. This was especially so for  Manpower Services (Manpower), which contributed the highest revenue improvement by adding RM15.3m.

Outlook   We are anticipating a stronger 2H12 as two additions of UzmAPRES (6^th  and 7^th  units) are on track to be deployed in 1-2 months time.

 Besides, SVP is also set to deliver positive earnings to the group as Uzma is expanding its core business into Coiled Tubing Unit (CTU) in Wireline.

Change to Forecasts

 Maintaining our FY12E net income of RM22.0m. 

 We are introducing FY13-14E net income of RM30.0m and RM34.0m, which will be supported by 1) the group’s flagship product – UzmAPRES, 2) the 5-year Wireline contract from Petronas Carigali S/B and 3) the new income stream from SVP.

Rating  MAINTAIN OUTPERFORM

Valuation    We have rolled over our valuation base to CY13 from CY12. As such, we are upgrading our target price to RM2.55 from RM2.20 based on 7.5x PER of CY13 earnings. The target PER is at 50% discount to our Oil & Gas sector’s PER of 15x as Uzma is a small cap player in the sector.

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

Source: Kenanga