Innovative Products & Technologies

We visited Uzma Berhad (UZMA)’s Artificial Lift Facility in Rayong, Thailand, hosted by the Head of Uzma Artificial Lift (UAL), Andrew Holmes. UAL is 75% owned by Uzma. During the visit, management demonstrated their product line & technologies and showed us how finished goods are stored before shipping out. Currently, the facility’s utilization stands at approximately 20%, highlighting substantial room for growth.

Uzma offers seven essential products and technologies, including:

1) Electrical Submersible Pump (ESP)

2) Horizontal Surface Pumping System (HSPS)

3) Thru-Tubing ESP (TTESP)

4) Can-Installed Pumping System (CIPS)

5) Uzma Rodless Pump (URP)

6) Produced Water Re-Injection (PWRI)

7) uzmaBOOST System

ESP: The Core Product of Uzma Artificial Lift (UAL)

ESP is the bread and butter of UAL, contributing to 60% of UAL’s revenue. These systems are designed to handle flow rates up to 140,000 barrels per day (BPD) and pressures up to 6,000 psi, making them ideal for a range of well conditions. In Malaysia, oil recovery rates without intervention are around 30%, but UAL’s ESP technology can push recovery to 80%, marking a significant improvement. They boast high efficiency, reduced downtime, and maintenance lead to immediate OPEX savings and higher fluid production. UAL is the No.1 provider of ESPs in Malaysia and the No.2 provider in Thailand.

TTESP: A Game-Changer for Mature Wells

While the new TTESP is not yet commercialized, it is gaining attention from potential clients due to its ability to reduce workover costs, which are notably high in mature well operations. UAL’s 30ft TTESP design offers a significant competitive edge over the 90ft alternative, which is another variation in the market. Its benefits are boosting high efficiency, reduced workover costs, and OPEX savings. The shorter equipment length and flexibility make the product a unique offering in the market.

UzmaBOOST: Our Preferred Technology

The uzmaBOOST system is engineered specifically for the Malaysian market, potentially tapping into approximately 800 wells. Although not yet commercialized, it has strong potential, with interest from well-established clients and we are expecting a grant to support its development. They combine gas lift and centrifugal pump technology to significantly enhance production while offering CAPEX savings. We like the system’s ability to utilize existing gas reservoirs, which also presents a green energy opportunity.

Uzma’s Main Strategy Moving Forward

Apart from UAL, we like UZMA’s current strategic plan to venture into new nonO&G businesses. UZMA’s biggest contributor to their revenue is their O&G segment that can be broken down to well solutions segment and production solutions segment. Their strategy to move forward is to add new businesses into their portfolio which are New Energy, Digital Energy and Energy Trading.

New Energy Segment

Through their special purpose vehicle (SPV), Uzma Kuala Muda Sdn Bhd, the company is set to generate revenue from their LSS4 project starting 4Q this year. Uzma is also exploring opportunities under the Corporate Renewable Energy Supply Scheme (CRESS) to increase corporate access to green energy. The open grid access model, enabling third-party electricity transactions, marks a critical step toward market liberalization and offers a competitive landscape for developers. Hence, we are expecting potential revenue growth in its renewable energy sector, in particular, from its flagship LSS4 project and in the next financial year, for other programs rolled out by the Ministry of Energy Transition and Water Transformation.

Digitalization & Technology

UzmaSAT-1, Malaysia's first commercial Earth observation satellite with submeter resolution, will deliver high-quality satellite data with up to five daily revisits, integrating into the constellation managed by their strategic partner, Satellogic. This capability will provide unparalleled satellite imagery and geospatial services across Southeast Asia, positioning Uzma as a leader in the geospatial sector. The satellite is set to launch in November 2024, with revenue recognition anticipated in early FY25.

Forecast & Recommendation

At a last price of RM0.93/share, UZMA is priced at a trailing PER of 7.4x FY24 Core EPS. We value the company at 8.3x FY25 Core EPS, at par to mean PER, arriving at a fair value of RM1.10/share.

Source: TA Research - 15 Oct 2024