Uzma to gain as PETRONAS intensifies upstream ops


PETALING JAYA: Uzma Bhd, with an order book worth RM2.4bil, stands in a good position to secure more contracts for its upstream oil and gas (O&G) services, translating to improvement in its earnings growth for this year and next.

Analysts are bullish on the energy and technology company as they expect its upstream segment in addition to its new energy division to secure more contracts in the near term, and hence propel earnings amid downside risks.

Kenanga Research said with an order book valued at RM2.4bil, Uzma is well-positioned to benefit from an increase in work orders as Petroliam Nasional Bhd or PETRONAS intensifies its upstream activities.

“We anticipate that the group will sustain its momentum in order book replenishment, aiming for RM1bil in financial year 2025 (FY25).

“Additionally, its new energy division is on track with the Sungai Petani power purchase agreement set to commence operations in the first quarter of financial year 2025 (1Q25), and no further delays are anticipated.

“After revising our gross margin assumptions from 38% to 40% and anticipating increased work orders for the upstream services division, we have adjusted our earnings forecasts for financial year 2024 (FY24) and FY25 upwards by 13% and 16%, respectively,” it added.

Kenanga Research, which is maintaining its “outperform” call on Uzma, said despite downside risks, it liked the company due to various reasons.

These include the company being a beneficiary of the current upcycle in upstream activities leading to increased O&G contract flows, its active thrust into sustainable businesses via its new energy segment which enhances Uzma’s environmental, social and governance appeal and help future proof its earnings, and the looming launch of its large-scale solar plant that will boost its recurring income.

Meanwhile, Phillip Capital said it believes Uzma is on track to surpassing its record-high profit of RM37mil recorded in FY14.

This is driven by an increase in activities, margin expansion from positive rate revisions, and a boost from the non-O&G business, it said.

To reflect the positive outlook, the brokerage said it is raising its FY24 forecasts by 17%, after considering higher margins for the O&G segment.

“We also raised our FY25-FY26 forecasts by 26% to 28% as our previous estimates for the non-O&G segment margins were too conservative, with its solar assets expected to commence operation by the first half of 2024,” it noted.

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