PETALING JAYA: The positive outlook on Uzma Bhd
is reaffirmed with its recent win of a five-year contract from Hibiscus Oil & Gas Malaysia Ltd.
According to Kenanga Research, the contract win was aligned with its assumption of Uzma securing RM1bil new contracts for upstream services in the financial year ending June 30, 2024 (FY24).
“Uzma possesses the ability to execute the project given its successful delivery of existing projects, particularly in the challenging deepwater segment.
“We estimate the net margin for the contract to be in the range of 7% to 8%, consistent with the overall performance of the group’s business,” the brokerage said in a report.
Kenanga Research maintained its “outperform” call on Uzma, with an unchanged target price of RM1.22, pegged to 10 times the estimated price-earnings ratio for FY25.
Uzma on Tuesday announced its subsidiary, Malaysian Energy Chemical & Services Sdn Bhd (Mecas) secured a five-year contract, effective from November 2023 to November 2028, from Hibiscus for the supply of chemicals and related services for the PM3 commercial arrangement area between Malaysia and Vietnam.
Kenanga Research noted that through 2013, Uzma secured a comparable five-year contract for similar services, provided by Exxon Mobil, with a total value of RM238il.
“We like Uzma due to it being a beneficiary of the current upcycle in upstream activities leading to an increase in the upstream services contract flows.
It is also actively thrust into sustainable businesses via its new energy segment that enhances Uzma’s environmental, social and governance appeal and future-proof its earnings; and the coming launch of its 50-megawatt large scale solar plant that will boost its recurring income and hence anchor earnings stability,” Kenanga Research said.
Similarly positive on Uzma’s prospects, Phillip Capital Research said Uzma’s recent contract win would add to the company’s RM2.4bil order book with earnings visibility until 2027.
“We estimate that this contract value is in the range of RM80mil to RM90mil, adding on to Uzma’s current outstanding order book of RM2.4bil. In FY23, Mecas delivered a total revenue of RM38mil.
“We gather that the outlook is looking positive driven by increased chemical demand led by higher sector activities, with Mecas potentially looking at around RM60mil revenue, up 58% year-on-year, in FY24,” the research house said.
Assuming a group level 7% profit-after-tax margin, the new contract from Hibiscus could contribute about RM6mil profit across the contract period, translating to an average RM1.2mil annual profit contribution from FY24, Philip Capital Research added.
It reiterated “buy” on Uzma, with an unchanged target price of RM1.30, based on an unchanged FY25 PER multiple of 10 times.
