By PublicInvest Research
Target Price: RM2.07
The contracts have been awarded to its wholly-owned subsidiary Uzma Engineering Sdn Bhd for the provision of jointed tubing electrical submersible pumps (ESP) and the deployments, coiled tubing ESP and the deployments as well as the surveillance, monitoring and maintenance of ESP.
The duration is for three years, starting from Nov 20, 2017 to Nov 19, 2020, with a first extension option of one year.
PublicInvest said under the umbrella contracts, execution of works will be dependent on orders extended from time to time at the discretion of Petronas Carigali, hence the inability to ascertain any concrete values as such.
Nonetheless, it reckons that the contracts will be financially beneficial to Uzma, and it is accounted as part of the company’s order book replenishment assumptions.
It remains encouraged that Uzma’s activity pick-up is a signal of recovery for the group, coupled with a slew of new awards secured to date since 2017. Uzma’s performance continues to be supported by its order book of about RM2.6bil and tender book of RM2bil, which would last up to 2019.
PublicInvest said the current price levels of Uzma shares are an opportunity to accumulate. The research house said this solidified Uzma’s growth prospects, and has reaffirmed its outperform call on the stock.
It maintains an unchanged target price of at RM2.07 based on an 11 times multiple to FY19 forecast earnings per share (EPS) of 18.8 sen. Uzma’s performance is expected to continue on an uptrend, with the uplift in oil prices above US$60 per barrel, which would likely see oil majors accelerating their capital expenditure spending.
By MIDF Research
Target Price: RM3.60
Muhibbah Engineeting (M) Bhd started the year with its share price advancing more than 13% for the first week of 2018.
Last year, Muhibbah secured RM1.6bil worth of job wins, which was 62.6% above MIDF Research’s estimates of RM600mil.
MIDF pointed out that Muhibbah’s awarded contracts in Malaysia amounted to 66.6% of its FY17 job wins, which indicated a quality order book. Its order book amounted to RM2.1bil.
For this year, MIDF is expecting Muhibbah to secure RM700mil worth of jobs in Qatar and Malaysia for infrastructure projects.
Despite the trade blockade by Saudi-led coalition to Qatar, project wins are not entirely muted as in October 2017 Muhibbah won another project in Qatar worth RM59.1mil (49% joint venture), on top of its previous award of RM438.1mil.
Earnings-wise, MIDF said it expects 2018 would be another smooth sailing year for Muhibbah despite the grim outlook for its cranes segment via Favelle Favco.
However, it reckons that Favelle Favco would stand a better chance to survive due to its operational size, customisation expertise and presence in South-East Asia and the Middle East.
Noticeably, earnings started to grow in Q4, 2016 illustrating the accretion of projects that reflected a better risk/reward profile on the back of 6% operating margin.
MIDF has maintained its earnings assumptions as Muhibbah is backed by total orderbook of RM2.1bil with an average backlog duration of 22 months, or 1.7 times construction revenue cover.
The research house reiterated its buy call on Muhibbah with an adjusted target price of RM3.60 per share on the basis of its sum-of-parts methodology.
SERBA DINAMIK HOLDINGS BHD
By Kenanga Research
Target price: RM3.80
Serba Dinamik Holdings Bhd has proposed to issue up to 135 million new shares, representing 10% of its existing share at an issue price to be determined later.
The private placement does not require further approvals given that the general mandate was approved at the previous AGM convened on May 26 last year.
The placement may be implemented in one or more tranches and is expected to be completed by the first quarter.
Kenanga Research is positive on the proposed fund-raising exercise as the bulk of the proceeds would be used for the Pengerang project and the company’s contracts in Tanzania.
It said the exercise would improve Serba Dinamik’s liquidity and financial position.
The research house has upgraded its earnings forecast on Serba Dinamik’s 2018 earnings by 14% on higher order book assumption of RM3bil, from RM2bil previously, based on its tender book of more than RM10bil.
Serba Dinamik’s current order book stood at RM5.3bil, of which RM4bil are attributable to operation and maintenance works.
Kenanga has reiterated its outperform call on Serba Dinamik with target price of RM3.80, from RM3.65 post earnings upgrade.
The research outfit said the target price was based on an enlarged share base of 1.485 billion shares, pegged to unchanged FY18 estimates of price to earnings ratio of 15 times. – thestaronline