TA Securities has upgraded its call on Uzma Bhd to buy from sell given its improved risk-reward profile. However, the research house lowered its target price to 85 sen from 87 sen previously, factoring in the double whammy from the recent political and economic headwinds.
In a note on March 4, the research house said near-term catalysts include monetisation of Tg Baram risk service contract (RSC) which is targeted to be completed by Feb 21 and will boost Uzma’s balance sheet and war chest. Potential new late-life assets (LLA) field from Petronas commencing July 2 will provide stable recurring income to anchor earnings.
However, Uzma’s commencement of the new RM100 mil Shell plugging and abandonment (P&A) contract was slightly delayed due to disruptions related to Covid-19.
Following management’s refreshed guidance, the research house has raised the current outstanding order book to RM2.2 bil (previous: RM2 bil) and lowered FY20 effective tax rate to 15% (previous: 21%).
“Additionally, we include the contribution of Uzma’s incremental 22% stake in Setegap Ventures Petroleum Sdn Bhd (SVP). This is also following the completion of SVP’s acquisition on Feb 27 last year.
“As a result of this, our FY20/21 forecasts are raised by 17%/3%. Additionally, we lower our valuation by 1x CY20 P/E to 8.5x. This is to factor in the double whammy from recent political and economic headwinds,” it said.
Uzma’s order book as of December 2019 totalled RM2.2 bil, comprising technology (RM68 mil), well services (RM1.48 bil) and production services (RM622 mil). This includes SVP’s order book of RM800 mil.
Meanwhile, Uzma’s bid book stands at RM3 bil, and comprises an invitation to bids, submitted bids and proposals to clients.
The counter closed 1.4% higher at 72.5 sen on March 4 giving it a market capitalisation of RM232.02 mil. – March 4, 2020
