UZMA (7250) : Uzma - Fuelled by new acquisitions
Target RM3.81 (Stock Rating: ADD)
Uzma’s 9M14 core net profit came in below expectations, making up 61.7% of our FY14 forecast and 62.5% of consensus. An interim 3.78 sen dividend was declared, which is a positive surprise. Due to the delay in the Tanjung Baram RSC drilling works, we cut our FY14 EPS forecast by 17.2%. We also cut our FY15 EPS forecast by 32% and FY16 by 39% to reflect the expected slowdown in the sector, but keep our Add call intact. We roll over our valuation to FY16, with a lower target price of RM3.81, valuing the stock at a CY16 P/E of 14.8x, a 30% discount to the oil & gas big caps, due to the lower EPS forecast. The start of oil production from the RSC and expansion into new lines of business are potential re-rating catalysts.
3Q14 core net profit up 48.2% yoy
Uzma’s 3Q14 core net profit jumped 48.2% yoy to RM13.5m, leading to an overall core net earnings growth of 13.2% yoy to RM29.3m for 9M14, but still falling short of what we had anticipated. Revenue increased by 11.9% yoy to RM327.4m in 9M14. Uzma’s 3Q14 earnings growth were boosted by maiden contributions from MMSVS and PEC, of which both acquisitions were completed in Jul 2014, and by the tax incentive given to the company for the transfer of technology that it undertakes for the acquisition of MMSVS. However, its profitability for 9M14 was affected by higher one-off professional fees for the acquisition of MMSVS and PEC, higher administrative expenses from higher staff costs as the group is aggressively hiring new people for future growth, and the renovation costs for its new office.
4Q14 to be weaker than expected
We expect a weaker 4Q14 as the drilling works for the Tanjung Baram RSC, which were supposed to start in Oct 2014, have been pushed back to early 2015 due to the monsoon season. This could affect the group’s revenue and bottomline, as Uzma is offering its services for some of the drilling works associated with the RSC. As a result, we are cutting our FY14 net profit forecast by 17.2% to reflect the delay.
3.78 sen dividend declared
Uzma declared a single-tier dividend of 3.78 sen per share. The group does not have a dividend policy and we did not anticipate the group to declare any dividends this year, but the dividend comes as a pleasant surprise.
Source: CIMB Daybreak - 26 November 2014
Target RM3.81 (Stock Rating: ADD)
Uzma’s 9M14 core net profit came in below expectations, making up 61.7% of our FY14 forecast and 62.5% of consensus. An interim 3.78 sen dividend was declared, which is a positive surprise. Due to the delay in the Tanjung Baram RSC drilling works, we cut our FY14 EPS forecast by 17.2%. We also cut our FY15 EPS forecast by 32% and FY16 by 39% to reflect the expected slowdown in the sector, but keep our Add call intact. We roll over our valuation to FY16, with a lower target price of RM3.81, valuing the stock at a CY16 P/E of 14.8x, a 30% discount to the oil & gas big caps, due to the lower EPS forecast. The start of oil production from the RSC and expansion into new lines of business are potential re-rating catalysts.
3Q14 core net profit up 48.2% yoy
Uzma’s 3Q14 core net profit jumped 48.2% yoy to RM13.5m, leading to an overall core net earnings growth of 13.2% yoy to RM29.3m for 9M14, but still falling short of what we had anticipated. Revenue increased by 11.9% yoy to RM327.4m in 9M14. Uzma’s 3Q14 earnings growth were boosted by maiden contributions from MMSVS and PEC, of which both acquisitions were completed in Jul 2014, and by the tax incentive given to the company for the transfer of technology that it undertakes for the acquisition of MMSVS. However, its profitability for 9M14 was affected by higher one-off professional fees for the acquisition of MMSVS and PEC, higher administrative expenses from higher staff costs as the group is aggressively hiring new people for future growth, and the renovation costs for its new office.
4Q14 to be weaker than expected
We expect a weaker 4Q14 as the drilling works for the Tanjung Baram RSC, which were supposed to start in Oct 2014, have been pushed back to early 2015 due to the monsoon season. This could affect the group’s revenue and bottomline, as Uzma is offering its services for some of the drilling works associated with the RSC. As a result, we are cutting our FY14 net profit forecast by 17.2% to reflect the delay.
3.78 sen dividend declared
Uzma declared a single-tier dividend of 3.78 sen per share. The group does not have a dividend policy and we did not anticipate the group to declare any dividends this year, but the dividend comes as a pleasant surprise.
Source: CIMB Daybreak - 26 November 2014
