UMWOG (5243) - UMW Oil & Gas - Height and slick
Target RM3.43 (Stock Rating: ADD)
UMW-OG ended FY14 on two highs. A bigger fleet of jack-up rigs led the company to post a record 4Q net profit, which supported its highest-ever full-year net profit that met expectations at 95% of our forecast and 101% of consensus estimates. The fleet expansion continues this year as the company expands beyond Southeast Asia. We continue to value the stock at 15x CY16 P/E, on par with our target market P/E. We keep our Add call, with these strong results and a Middle Eastern foray as potential re-rating catalysts.
33% yoy jump in FY14 net profit
The deployment of Naga 5 in May 2014 and Naga 6 in Oct 2014 jacked up UMW-OG's 4Q net profit by 39% yoy to a new record. The strong 4Q performance led to a 33% yoy increase in FY14 net profit, which is also a new high, as annual revenue sailed past the RM1bn-mark for the first time. However, full-year DPS stands at 1 sen, only half of what we expected, as the company did not announce a final dividend. We cut our DPS forecasts by 1 sen to 2 sen for FY15 and 3 sen for FY16.
Fleet expansion and RM1.9bn in orders
Naga 7 was delivered last month, as scheduled. The jack-up has been signed up to service a 120-day, US$20m contract with Frontier Oil in the Philippines effective this month, with an option for a 180-day extension. Meanwhile, Naga 8, which is expected to join the fleet in Sep this year, was 66.85% completed as at last month. Management has yet to clinch a contract for the jack-up, but it remains active in the bidding circuit, gunning for 29 contracts worth RM5.6bn. As at Dec 2014, the company had an order book of RM1.9bn.
New phase of international expansion
UMW-OG has evolved from a local player to a force to be reckoned with in Southeast Asia. But it is also on the verge of a new phase of international expansion if it is successful in securing a contract in the Middle East by year-end to coincide with the expected delivery of Naga 8 in Sep. Within Southeast Asia, the company is eyeing Indonesia and may have an advantage in the prospective market as both Naga 2 and Naga 3 were built in Batam. The composition of its fleet of rigs working in Malaysia vs. overseas is expected to shift from 33:67 last year to 25:75 this year.
Source: CIMB Daybreak - 24 February 2015
Target RM3.43 (Stock Rating: ADD)
UMW-OG ended FY14 on two highs. A bigger fleet of jack-up rigs led the company to post a record 4Q net profit, which supported its highest-ever full-year net profit that met expectations at 95% of our forecast and 101% of consensus estimates. The fleet expansion continues this year as the company expands beyond Southeast Asia. We continue to value the stock at 15x CY16 P/E, on par with our target market P/E. We keep our Add call, with these strong results and a Middle Eastern foray as potential re-rating catalysts.
33% yoy jump in FY14 net profit
The deployment of Naga 5 in May 2014 and Naga 6 in Oct 2014 jacked up UMW-OG's 4Q net profit by 39% yoy to a new record. The strong 4Q performance led to a 33% yoy increase in FY14 net profit, which is also a new high, as annual revenue sailed past the RM1bn-mark for the first time. However, full-year DPS stands at 1 sen, only half of what we expected, as the company did not announce a final dividend. We cut our DPS forecasts by 1 sen to 2 sen for FY15 and 3 sen for FY16.
Fleet expansion and RM1.9bn in orders
Naga 7 was delivered last month, as scheduled. The jack-up has been signed up to service a 120-day, US$20m contract with Frontier Oil in the Philippines effective this month, with an option for a 180-day extension. Meanwhile, Naga 8, which is expected to join the fleet in Sep this year, was 66.85% completed as at last month. Management has yet to clinch a contract for the jack-up, but it remains active in the bidding circuit, gunning for 29 contracts worth RM5.6bn. As at Dec 2014, the company had an order book of RM1.9bn.
New phase of international expansion
UMW-OG has evolved from a local player to a force to be reckoned with in Southeast Asia. But it is also on the verge of a new phase of international expansion if it is successful in securing a contract in the Middle East by year-end to coincide with the expected delivery of Naga 8 in Sep. Within Southeast Asia, the company is eyeing Indonesia and may have an advantage in the prospective market as both Naga 2 and Naga 3 were built in Batam. The composition of its fleet of rigs working in Malaysia vs. overseas is expected to shift from 33:67 last year to 25:75 this year.
Source: CIMB Daybreak - 24 February 2015
