UMWOG (5243) : UMW Oil & Gas - Middle East fuels future growth
Target RM5.11 (Stock Rating: ADD)
The fear surrounding oil prices has been overplayed, UMW-OG’s President Rohaizad Darus said at the company’s post-3Q results briefing before presenting a compelling argument for growth. UMW-OG’s active fleet expansion is ongoing. Also, having built a solid base in Southeast Asia, it is now eyeing the Middle East, with a maiden contract expected by end-FY15. It is currently bidding for a staggering 29 bids worth US$1.7bn in the Middle East and Southeast Asia. We cut our FY14 EPS to impute bidding-related costs. We continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. We maintain our Add call, with the Middle Eastern foray and a contract for Naga 8 as potential re-rating catalysts.
What Happened
Following the release of 3Q results yesterday, UMW-OG's management today held a briefing attended by around 30 analysts and fund managers. The briefing was chaired by Rohaizad, who was accompanied by CFO Wai Thuy Fong and Head of Corporate Development Chew Eng Hong. There were no surprises from the briefing. See overleaf for the highlights.
What We Think
We left the briefing feeling encouraged by management’s optimism in the outlook and opportunities in the drilling space. Management was visibly pumped at the prospects of venturing into the Middle East, which would mark the company’s new phase of international expansion after successfully capturing Southeast Asia. We are also heartened that the construction of Naga 7 and Naga 8 is on track. Naga 7, slated for completion next month and delivered in Jan 2015, is 97% completed. It has been signed up for work in the Philippines effective Jan 2015. Naga 8, which is expected to join the fleet in Sep 2015, is 57% completed. We understand that management is close to clinching a contract for Naga 8. Management remains very active in the bidding circuit and is gunning for 29 contracts worth US$1.7bn.
What You Should Do
We advise investors with a long-term investment horizon to take advantage of the share price correction to accumulate. The share price has fallen 20% YTD. UMW-OG has evolved from a local player to a force to be reckoned with in Southeast Asia, and is now at the verge of being a global player if it secures a contract in the Middle East next year.
Source: CIMB Daybreak - 26 November 2014
Target RM5.11 (Stock Rating: ADD)
The fear surrounding oil prices has been overplayed, UMW-OG’s President Rohaizad Darus said at the company’s post-3Q results briefing before presenting a compelling argument for growth. UMW-OG’s active fleet expansion is ongoing. Also, having built a solid base in Southeast Asia, it is now eyeing the Middle East, with a maiden contract expected by end-FY15. It is currently bidding for a staggering 29 bids worth US$1.7bn in the Middle East and Southeast Asia. We cut our FY14 EPS to impute bidding-related costs. We continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. We maintain our Add call, with the Middle Eastern foray and a contract for Naga 8 as potential re-rating catalysts.
What Happened
Following the release of 3Q results yesterday, UMW-OG's management today held a briefing attended by around 30 analysts and fund managers. The briefing was chaired by Rohaizad, who was accompanied by CFO Wai Thuy Fong and Head of Corporate Development Chew Eng Hong. There were no surprises from the briefing. See overleaf for the highlights.
What We Think
We left the briefing feeling encouraged by management’s optimism in the outlook and opportunities in the drilling space. Management was visibly pumped at the prospects of venturing into the Middle East, which would mark the company’s new phase of international expansion after successfully capturing Southeast Asia. We are also heartened that the construction of Naga 7 and Naga 8 is on track. Naga 7, slated for completion next month and delivered in Jan 2015, is 97% completed. It has been signed up for work in the Philippines effective Jan 2015. Naga 8, which is expected to join the fleet in Sep 2015, is 57% completed. We understand that management is close to clinching a contract for Naga 8. Management remains very active in the bidding circuit and is gunning for 29 contracts worth US$1.7bn.
What You Should Do
We advise investors with a long-term investment horizon to take advantage of the share price correction to accumulate. The share price has fallen 20% YTD. UMW-OG has evolved from a local player to a force to be reckoned with in Southeast Asia, and is now at the verge of being a global player if it secures a contract in the Middle East next year.
Source: CIMB Daybreak - 26 November 2014
