• Uzma declared a first and final dividend of RM0.02 for FY24, marking its first payout since 2014. It also proposed a dividend reinvestment scheme, alongside a 1-for-3 bonus issue
• We view these developments positively, signalling an improved outlook that allows for consistent dividend payouts and enhances the stock appeal through better liquidity
• Maintain BUY rating with RM1.78 target price

First dividend in 10 years; DRS and bonus issue announced

Last Friday, Uzma made several announcements aimed at rewarding its shareholders: 1) declared a first and final dividend per share (DPS) of RM0.02 for FY24, 2) proposed to establish a dividend reinvestment scheme (DRS), and 3) proposed bonus issue of 1 bonus share for every 3 existing ordinary shares, totalling up to 172m new shares. Both the DRS and bonus issue will be subject to shareholder approval at an extraordinary general meeting (EGM), while the dividend payout will be finalized at the annual general meeting (AGM).

Consistent dividend signals a sustainable outlook

The dividend payout comes as a positive surprise, marking the resumption of Uzma’s dividend payment since 2014. The RM0.02 DPS represents 17% payout ratio. Together with the DRS, we believe Uzma is committed to a consistent dividend payout going forward, reaffirming the group’s positive outlook for improved earnings and cash flow. The proposed DRS will give existing shareholders the option to reinvest in whole or in part of their cash dividend for new ordinary shares, providing Uzma with flexibility in capital management by retaining cash that would otherwise be distributed. We also encouraged by the bonus issue, which is expected to further improve the stock liquidity.

Reiterate BUY with RM1.78 target price

We had not previously accounted for a dividend payout in our estimates, but now projecting a DPS of RM0.02 for FY25–27E. We remain positive on Uzma’s earnings prospects, supported by increased O&G work activities, commencement of LSS4 and healthy RM2.9bn orderbook. We make no changes to the rest of our assumptions. We reiterate our BUY rating and RM1.78 target price, based on an unchanged 12x PE multiple on FY25E EPS. Risks to our BUY call include lower-than-expected work orders from customers, unforeseen project delays, and escalation in project execution cost.

Source: Phillip Capital Research - 30 Sept 2024