PETALING JAYA: Oil and gas services provider Uzma Bhd's share price has been on an uptrend, while the company's orderbook has been steadily beefed up.
Although not widely covered by analysts, the stock has three “buy” calls and a “hold” call. The stock has risen 42% year-to-date, hitting a 52-week high of RM2.40 last Monday. It closed unchanged at RM2.08.
Last Friday, Uzma announced that it had secured a five-year contract worth RM238mil from ExxonMobil Exploration and Production Malaysia Inc for the provision of oilfield chemicals and associated services.
BIMB Securities Research analyst Chiong Tong Chai has upgraded Uzma to a “buy”, with a target price of RM2.32 on recent share price weakness. He pointed out that the company's contract replenishment was looking good.
“Relative to its earnings base, Uzma has registered a rather good level of orderbook replenishment, with RM473mil and RM238mil secured in financial year (FY) 2012 and on a year-to-date basis.
“While no specifics have been shared, we understand that the company is working on five significant bids, which we think have a fair chance for positive news, given its recent tender success,” he said.
He thinks there could be a likelihood of an upward revision post-first-quarter results.
“We are closely monitoring the company's business development and believe there is good scope for us to expand our price-to-earnings ration valuation on the stock (currently pegged at 10 times), given its strong earnings growth and orderbook replenishment and improving market interest in the stock,” he said, adding that success in its current five significant bids could provide the final thrust for the valuation revision.
PublicInvest Research noted that Uzma shares had surged by 45% since its initiation coverage in July 2012, fuelled by market expectations of future growth.
“We see Uzma fairly valued at these levels, and therefore downgrade our call to neutral' from outperform', as we see limited upside from current levels, having priced-in this growth, despite a revision of our target price to RM2.29 (from RM1.85) upon the rollover of valuations to eight times FY14 earnings per share of 28.6 sen,” it said.
Meanwhile, Public Investment Bank Bhd analyst Nuraida Mohd Ali said the company's ability to replenish its orderbook was due to its niche expertise. She said the company was optimistic of bringing up its total units of uzmAPRESTM deployed in FY13 to 12, but it was only factoring in 11 units in its FY13/14 earnings forecast, as it was concerned over likely delays in future installations. uzmAPRESTM total package solutions consist of consultation services, the equipment package and the operations team.
PublicInvest views Uzma's recent contract by ExxonMobil positively, saying that the segment only generated marginal contributions to bottomline, given the scale of business to the group. With the latest contract award, Uzma currently had an orderbook of approximately RM1.2bil, which could last it until 2015.