UZMA has secured an extension for the provision of hydraulic workover unit for the Bualuang project for two years, bringing its YTD job wins to RM715m based on our estimates, which is still within our assumption. We maintain our forecasts, TP of RM1.45 and OUTPERFORM call.

UZMA has been awarded a contract extension by Medco Energi Thailand (Bualuang) Limited (Medco) for the provision of hydraulic workover unit (HWU) Services for the Bualuang project. The scope of works comprises of the provision of HWU and associated equipment service required for workover and well services activities at offshore Thailand with contract tenure of two years (effective from 20 Mar 2024).

Based on historical wins, HWU jobs usually generate RM15m-RM20m of revenue in total for two-year contracts. This latest win has boosted its FY24 cumulative wins to RM715m vs. our full-year job win assumption of RM1b. We anticipate this job to achieve a net margin of 7%-8%, consistent with the group's overall net margins. Therefore, we consider this job win to align with our expectations.

Forecast. Maintained.

Valuations. We maintain our TP at RM1.45 pegged to an unchanged CY25F 10x PER, which is consistent with the average PER for small to mid-cap upstream services players. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

Investment case. We like UZMA due to: (i) it being a beneficiary of the current up-cycle in upstream activities leading to increased O&G contract flows, (ii) its active thrust into sustainable businesses via its new energy segment which enhances UZMA’s ESG appeal and help future proof its earnings, and (iii) the looming launch of its large-scale solar plant that will boost its recurring income. Maintain OUTPERFORM.

Risks to our call include: (i) premature end to industry up-cycle following a dip in oil prices, (ii) poor project execution on new energy division leading to cost overruns and delays, and (iii) opex pressure emanating from an inflationary environment, particularly on expenses for manpower and materials.

Source: Kenanga Research - 20 Mar 2024