UZMA: Strong Upstream Performance Drives Solid Earnings, Outperform Rating Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading investment bank has maintained its “Outperform” rating on a prominent oil and gas services provider, along with a target price of RM0.25, following a first-quarter performance that met expectations. The company recorded a core Profit After Tax and Minority Interest (PATAMI) of RM14.0 million in 1QFY26, driven primarily by robust activities within its Oil & Gas (O&G) segment. This result aligns with 25.8% of the full-year forecast and 24.1% of consensus estimates.
Performance Review
The O&G segment was the primary driver of this quarter’s strong performance, delivering a record-high revenue of RM190.1 million in 1QFY26. This represents a substantial increase of 94.8% year-on-year and 49.6% quarter-on-quarter, largely attributable to the successful mobilisation of a significant 2D and 3D/4D seismic data acquisition contract secured in May 2025 from PETRONAS Carigali. The period from July to September typically marks a seasonal peak for offshore O&G activity levels, following the ramp-up phase after the monsoon season in March, further boosting the segment’s contributions.
Challenges and Moderation
Despite the strong O&G showing, core profit saw a sequential decline of 15.4% quarter-on-quarter. This moderation was mainly due to the absence of contributions from New Energy (NE) EPCC projects, following the completion of a major contract in the previous quarter, coupled with a higher effective tax rate. Segmental margins in O&G also moderated from 16.6% in 4QFY25 to 12.7% in 1QFY26. This was attributed to the lower margin associated with chartering a long-term seismic vessel under a back-to-back arrangement with the vessel owner. The NE segment experienced a sharp revenue decrease of 86.9% quarter-on-quarter, bringing in RM7.1 million, predominantly because of the conclusion of subcontract works for a 13.42MWac solar PV plant.
Future Outlook
Looking ahead, the investment bank anticipates continued volatility in the O&G segment’s earnings, particularly for call-out contracts, which could face intermittent delays amid ongoing PETRONAS-PETROS negotiation overhangs. However, this volatility is expected to be partially cushioned by recurring workstreams and contributions from other business segments. The NE segment is projected to remain subdued for at least the next two quarters, pending the release and adoption of the Solar Accelerated Transition Action Plan (Solar ATAP) guidelines in December 2025. Nevertheless, recurring earnings from the LSS4 Kuala Kedah project are expected to provide a steady income base, with the company actively tendering for new solar PV installation EPCC works.
