PETALING JAYA: Uzma Bhd’s latest contract win will help keep the company’s order book above the RM2bil level, providing earnings visibility for up to three years.

       The oil and gas services provider on Monday announced it had received a work order award worth RM29mil from Petronas Carigali Sdn Bhd for the provision of a risk transfer incentive contract (RTIC) for idle wells reactivation and production enhancement services for a Sabah asset.

       The contract duration is for three years, commencing on July 13, 2021, to July 12, 2024.

       The market reacted positively to Uzma’s new job win.

       The company’s share price rose 9.65% up to close at 62.5 sen

       According to Public Investment Bank Research (Public Invest), the new job from Petronas Carigali is estimated to contribute about RM1.3mil to Uzma’s net earnings from the financial year ending June 30, 2022 (FY22) to FY24, assuming a blended net profit margin of 4.5%.

       “With this contract, we expect its outstanding orderbook to remain healthy at above RM2bil (including umbrella contract), translating to 3.6 times of FY20 revenue,” the brokerage said.

       Public Invest reiterated its “outperform” stance on Uzma, with a target price of 95 sen, representing an upside of 64%. The target price is based on 10 times price-earnings ratio over 2022 earnings per share of 9.5 sen.

       Public Invest said it maintained its earnings forecast for Uzma, having assumed the contract from Petronas Carigali as part of its replenishment assumption.

       “The award of this contract comes as no surprise, as Uzma offers a truly integrated approach to idle well reactivation from sub-surface assessment and recommendation to well intervention services,” Public Invest said.

       “We view this contract positively as it could lead to more opportunities in idle well reactivation in Malaysia,” it added.

       Citing the Petronas Activity Outlook 2021-2023, Public Invest noted there are currently more than 3,000 wells, of which 45% were still idle in Malaysia.

       Uzma is expected to announce its financial results for the fourth quarter of FY21 on Aug 26.

       note to sub: can cut from here if need be.

       Public Invest said given stricter adherence to standard operating procedures, including the requirement of 14-day quarantine, Uzma’s profit margins would be affected as operational efficiency remained limited amid the Covid-19 pandemic lockdown.

       For the nine months ended March 31, 2021, Uzma posted a net profit of RM16.4mil on revenue of RM285.4mil. This compared with a net profit of RM21.6mil on revenue of RM406.3mil in the corresponding period last year.

       The company noted the significant decline in revenue for the period in review was due to the lower as well as delayed activities as a result of Covid-19 pandemic, which has led to unprecedented impacts on the industry.