Stock Name: UZMA
Company Name: UZMA BHD
Uzma Group Bhd
(Sept 13, RM1.79)
Not rated at RM1.79 with fair value of RM2.74: Founded in May 2000, Uzma started off as a manpower and consultancy provider. It was listed on the then Second Board of the KL Stock Exchange on July 2008. The company's services are provided in five broad categories: (i) geoscience and reservoir engineering; (ii) drilling services; (iii) production services; (iv) oilfield chemical; and (iv) placement and recruitment.
Long term, UzmaPRES and UzmaWireline contracts will lead to more consistent future earnings. Uzma's roots in geoscience and reservoir engineering and its previous involvement in field studies for Petronas Carigali Sdn Bhd mean that the company has intimate knowledge of the fields and has first-hand knowledge of any upcoming projects/opportunities. The purchase of Malaysian Energy Chemical and Services Sdn Bhd could lead to potential new income stream as it enables Uzma to be a direct participant in any chemical enhanced oil recovery (CEOR) projects.
The key risks include: (i) competition from more established and international players could delay growth; (ii) crude oil price volatility could lead to delay or cancellation of projects; and (iii) signficant dependence on Petronas Carigali heightens income concentration risk.
For FY12/FY13, we forecast net profit of RM24.3 million and RM28.3 million respectively as: (i) the UzmaPRES units grow to eight by FY12 and 10 by FY13; and (ii) the UzmaWireline division benefits from full-year earnings of the RM170 million long-term contract.
At its current price of RM1.79, Uzma trades at prospective FY12/FY13 price-earnings ratio (PER) of 5.9 times and 5 times which are at a significant discount to its oil and gas peers. Assuming nine times FY12 PER, we estimate the stock would be worth RM2.74 per share which implies an attractive 52.9% upside to its current share price. Our nine times PER assumption implies a: (i) discount to our target FY12 PER range of 12 to19 times for the oil and gas stocks under our coverage; (ii) 25% discount to the current sector average FY12 PER of 12 times; and (iii) around 15% discount to the global peers' average FY12 PER of 10.5 times. While our lower target PER against local and global peers is due to the illiquidity of the stock, we believe there is significant upside to our fair value estimate if the earnings growth materialises as projected. We are positive on the company's forward prospects and believe that it warrants a second look given that it is in an industry sweet spot with EOR being on the forefront of Petronas' mind. ' RHB Research
This article appeared in The Edge Financial Daily, September 14, 2011.
Company Name: UZMA BHD
| Research House: RHB | Price Call: BUY | Target Price: 2.74 |
Uzma Group Bhd
(Sept 13, RM1.79)
Not rated at RM1.79 with fair value of RM2.74: Founded in May 2000, Uzma started off as a manpower and consultancy provider. It was listed on the then Second Board of the KL Stock Exchange on July 2008. The company's services are provided in five broad categories: (i) geoscience and reservoir engineering; (ii) drilling services; (iii) production services; (iv) oilfield chemical; and (iv) placement and recruitment.
Long term, UzmaPRES and UzmaWireline contracts will lead to more consistent future earnings. Uzma's roots in geoscience and reservoir engineering and its previous involvement in field studies for Petronas Carigali Sdn Bhd mean that the company has intimate knowledge of the fields and has first-hand knowledge of any upcoming projects/opportunities. The purchase of Malaysian Energy Chemical and Services Sdn Bhd could lead to potential new income stream as it enables Uzma to be a direct participant in any chemical enhanced oil recovery (CEOR) projects.
The key risks include: (i) competition from more established and international players could delay growth; (ii) crude oil price volatility could lead to delay or cancellation of projects; and (iii) signficant dependence on Petronas Carigali heightens income concentration risk.
For FY12/FY13, we forecast net profit of RM24.3 million and RM28.3 million respectively as: (i) the UzmaPRES units grow to eight by FY12 and 10 by FY13; and (ii) the UzmaWireline division benefits from full-year earnings of the RM170 million long-term contract.
At its current price of RM1.79, Uzma trades at prospective FY12/FY13 price-earnings ratio (PER) of 5.9 times and 5 times which are at a significant discount to its oil and gas peers. Assuming nine times FY12 PER, we estimate the stock would be worth RM2.74 per share which implies an attractive 52.9% upside to its current share price. Our nine times PER assumption implies a: (i) discount to our target FY12 PER range of 12 to19 times for the oil and gas stocks under our coverage; (ii) 25% discount to the current sector average FY12 PER of 12 times; and (iii) around 15% discount to the global peers' average FY12 PER of 10.5 times. While our lower target PER against local and global peers is due to the illiquidity of the stock, we believe there is significant upside to our fair value estimate if the earnings growth materialises as projected. We are positive on the company's forward prospects and believe that it warrants a second look given that it is in an industry sweet spot with EOR being on the forefront of Petronas' mind. ' RHB Research
This article appeared in The Edge Financial Daily, September 14, 2011.
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