Broker: UOB Kay Hian
Date of Report: 4 June 2025

Uzma Bhd: Orderbook Strength and Recurring Income Challenges Define Outlook

Introduction: Uzma’s Strategic Evolution and Market Position

Uzma Bhd, a prominent integrated oil & gas services provider, continues its strategic transition to balance its traditional upstream business with a rapidly developing non-O&G portfolio. The company’s focus areas now include well services (WS) and production services (PS) within O&G, alongside growth in new energy, energy trading, and digital earth segments.

Share Price and Valuation Snapshot

• Share Price: RM0.41
• Target Price: RM0.76 (Upside: +84.7%)
• Market Cap: RM241.4m (USD 50.4m)
• 52-week high/low: RM0.93 / RM0.37
• Shares issued: 588 million
• FY25 NAV/Share: RM1.38
• FY25 Net Debt/Share: RM0.36
• Major Shareholder: Tenggiri Tuah (25.4%)

Orderbook Momentum: Robust Growth Despite Earnings Risks

Uzma’s proven expertise in production enhancement and maintenance services has generated substantial orderbook growth, mainly from the PS segment. As of April 2025, the orderbook exceeded RM4.1 billion, reflecting a >30% increase in just three months. Notably, 74% of this orderbook remains O&G-centric, with the PS segment alone surging from RM1.1 billion to RM2.0 billion quarter-on-quarter.
Recent contract wins, which are not yet reflected in the RM4.1 billion figure, could add another RM1 billion to the tally. The current oil price environment, with Brent forecasts at USD66/bbl for 2025 and USD59/bbl for 2026, supports continued investment in existing well production and maintenance activities.

Recurring Income Mix Target: Setbacks and Delays

Despite orderbook strength, Uzma is set to miss its ambitious five-year recurring income mix target of 60% (due in 4QFY25). The primary hurdle is the delay of the SARA-WIF (Second Water Injection Facility) project. Originally scheduled for April 2025, the sailaway has been pushed to October 2025 or potentially February 2026, mainly due to client-requested design changes and the need to avoid costly monsoon season logistics. This means the startup will likely be deferred to FY27, impacting earnings visibility and the achievement of recurring income goals.

Financial Highlights: Key Metrics and Forecasts

Segmental Forecasts and Orderbook Composition

• Group Revenue (RMm): FY25F: 703.6 | FY26F: 983.6 | FY27F: 871.5
• Services Revenue: FY25F: 396.7 | FY26F: 475.1 | FY27F: 233.1
• Non-O&G Revenue: Set to grow from RM250m in FY25F to RM610m in FY27F
• Orderbook Growth: Driven by PS segment, with new contracts in marine seismic and well services

Recent Contract Wins and New Ventures

Uzma has bolstered its contract pipeline with several new awards:

• Marine Streamer and Ocean Bottom Seismic (OBS) Data Services for Petronas Carigali: Two-year contract commenced May 2025. The chartered seismic vessel is scheduled for deployment after refurbishment, with potential total revenues of USD200m (USD270,000/day). Uzma acts as project manager with scope for additional value-added geoscience services.
• Pembangunan Satelit Penderiaan Jauh Negara Project: Awarded in May 2025, this public-private partnership aims to boost Malaysia’s remote sensing satellite capabilities. The project includes three years of satellite development and five years of operations, with a possible 2028 launch. Scope likely involves building multiple satellites, training engineers, and upgrading ground stations.
• Other notable contracts:
  • Non-Rig Assisted Electric Wireline Logging (EWL) for Petronas Carigali (3 years)
  • Pumping, well unloading, and optimisation (Vestigo: RM20m)
  • Secondary cementing services (Petronas Carigali: RM30m)
  • Integrated well intervention/project management (Enquest: RM23m)
  • Various Thailand projects (PTTEP: RM9.2m)

Balance Sheet and Leverage

Uzma’s balance sheet reflects a significant increase in gross debt, nearly doubling year-on-year. However, excluding project-specific loans (SARA-WIF 2.0 and LSS4 solar), net gearing would have been a more modest 0.54x versus the reported 1.13x in 2QFY25.

Cash Flow Overview

• Operating Cash Flow: RM77m (2024); RM86m (2025F); RM3m (2026F); RM125m (2027F)
• Investing Activities: High capex in 2024 (RM219m), moderating in subsequent years
• Financing: Increased borrowings to support project investments; dividend payments steady at RM5m annually
• Ending Cash & Equivalents: RM132m (2024); RM290m (2025F); RM262m (2026F); RM361m (2027F)

ESG Commitment: Environmental, Social, and Governance Highlights

• Environmental: Commitment to net-zero carbon targets, with a clear roadmap for non-O&G diversification. Long-term solar revenue goal targeted at >RM1b post-2030.
• Social: Workforce diversity exceeds 20% female representation among 880 staff. Lost Time Injury Frequency remains near zero, reflecting strong safety culture.
• Governance: Board independence is robust, with 5 out of 8 members being independent and possessing wide industry expertise.

Valuation and Investment Recommendation

UOB Kay Hian maintains a BUY rating with a target price of RM0.76, applying an unchanged 8x PE. While recurring income target setbacks and SARA-WIF delays pose short-term earnings risks, the strong O&G orderbook, robust contract pipeline, and growing non-O&G ventures support long-term value. The market appears to be discounting Uzma heavily for perceived fund-raising risks, suggesting investors take a wait-and-see approach for tangible earnings delivery and ESG milestones.

Conclusion: Key Takeaways for Investors

• Uzma’s orderbook growth and contract wins underpin a positive long-term outlook, but recurring income mix target delays will weigh on near-term sentiment.
• SARA-WIF project delays push recurring income realization to FY27, necessitating revised strategic targets.
• Non-O&G segments, especially digital earth and solar, are positioned for substantial expansion and long-term ESG-driven value creation.
• Financial discipline and leverage management remain crucial as the company invests in new growth avenues.

Investors seeking exposure to Malaysia’s evolving energy landscape, especially those prioritizing ESG credentials and orderbook visibility, may find Uzma’s current valuation compelling despite near-term volatility.