News UMW
Standard Drilling Sdn Bhd (UMWSD), a wholly owned unit of UMW Holdings has
secured a contract from PetroVietnam Drilling & Well Services Corporation
(PV Drilling).
UMW would provide the Naga 2 rig and related drilling
services to PetroVietnam Drilling to drill wells for the end client, Hoang Long
Joint Operating Company. The UMWSD-PV Drilling contract is for a duration of
six months with an option for another six months.
NAGA 2 is a premium independent-leg cantilever
jack-up rig that has a drilling depth capability of 30,000 feet and has a rated
operating water depth of 350 feet.
Comments At the
moment, NAGA 2 is operating in Indonesia, serving its contract with HESS
(Indonesia-Pangkah) Limited, which is expected to end in April 2013.
Based on UMW's press release, NAGA 2 will be moved
to the Vietnam waters in May 2013 after completing its contract in Indonesia.
Outlook We
expect UMW Toyota and Perodua to retain their leadership in the non-national
and national passenger car segments respectively.
Re-rating catalysts would include: (i)
stronger-than expected vehicle sales and (ii) the listing of its Oil & Gas
unit.
Forecast There
were no financial details revealed in the press release. As such, we are
leaving our FY13-14 forecasts unchanged for now pending further guidance from
management. However, based on NAGA 3’s charter rate of USD145k/day (which was obtained
in 2012) and the short duration of 6 months, we expect the profit contribution
to be small.
Rating Maintain
MARKET PERFORM
We are maintaining our MARKET PERFORM rating
on the stock at this juncture even though the share price has already rallied
above our target price. However, our target price is currently under review for
a possible upgrade on valuation grounds.
Valuation Our
target price of RM12.37 which is based on 14.0x FY13 EPS is currently under
review. At the moment, the PE multiple of 14.0x applied on UMW is lower than
the auto sector’s peers’ average range of 15.5x-16.0x.
Risks Uncertainty from the upcoming General Election
may weaken consumer sentiments.
Source: Kenanga
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