Uzma Bhd
(March 20, RM1.01)
Maintained outperform with an unchanged target price (TP) of RM1.12: Just a few days after it had been awarded an Indonesian-based contract, Uzma Bhd announced that it had secured another contract, this time from Thailand-based PTTEP International Ltd, PTTEP Siam Ltd and PTTEP SP Ltd for the provision of onshore Hydraulic Workover Services (340K). While the specific job details and values are unidentified, we are pleased with this announcement as it demonstrates the group’s ability to replenish its order book consistently, backed by its strong position as a brownfield service provider. This also undoubtedly ensures the group’s earnings visibility for the next three-year period with an extension of one year. We kept our forecast unchanged nonetheless, as we assume this under our order book replenishment target. Our “outperform” call on the group is reaffirmed — supported by its around RM1.2 billion balance order book in hand and stable profit margins. We maintain our TP of RM1.12 based on a 10 times price- earnings multiple over financial year ending 2020 forecasts (FY20F) earnings per share of 11.2sen.

The group via its wholly-owned subsidiary, MMSVS Group Holdings Co Ltd, has been awarded a new contract in Thailand for provision of onshore Hydraulic Workover Services (340K). No other details were provided, with the value for this contract also unknown. The contract lifespan is 39 months with a one-year extension period, starting from 1st March 2019.

Gross profit margin for this contract is expected to be around 35%. However, our forecast is maintained as we assume this under our order book replenishment assumption.

Uzma earnings’ outlook remains promising backed by, i) its healthy outstanding order book in hand of about RM1.2 billion, ii) stable gross profit margins above the 30% level, and iii) active tender book of around RM3 billion. Uzma’s activities are expected to pick up in 2H19 in line with the stable industry outlook. — PublicInvest Research, March 20