UZMA: Strong O&G Performance Drives Earnings to Meet Expectations, Valuation Remains Attractive
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company’s first quarter of fiscal year 2026 (1QFY26) saw its core net profit of RM14m align with both internal and consensus expectations. This performance signals a robust operational quarter, with the figure constituting approximately 22% to 24% of the full-year earnings forecasts from the bank and the street.
Performance Review
Despite a marginal year-on-year (YoY) revenue decline of 1.3% to RM205m, the company demonstrated impressive operational efficiency. The EBITDA margin notably improved, rising by 7 percentage points to 19.6%. This enhanced margin is primarily attributed to a more favorable revenue mix, where the oil and gas (O&G) segment accounted for a significant 93% of total revenue in 1QFY26, a substantial increase from 47% in 1QFY25. Stronger O&G activities and better margins were key drivers of the stronger YoY earnings performance.
The commencement of a new seismic vessel contract in August 2025 and a wireline contract starting in March 2025 further bolstered the O&G segment. However, the overall revenue was slightly impacted by weaker performance in the new energy and trading segments, partly due to the absence of a major one-off gas oil shipment that had benefited previous periods.
Sequentially, the core net profit experienced a 15% quarter-on-quarter (QoQ) decline. This was largely due to a high base in 4QFY25, which had benefited from the completion of an EPCC project and the shipment of gasoil and urea. Higher depreciation and finance costs in 1QFY26 also contributed to the sequential dip. While the new 2-year seismic vessel contract helped offset some revenue weakness, its contribution was more significant towards the latter part of the quarter, with more substantial contributions anticipated in subsequent quarters.
Future Outlook and Recommendation
The investment bank maintains a positive outlook on the company’s growth prospects. This optimism is underpinned by the ongoing contributions from the new seismic vessel contract, increased activity in wireline contracts, and the full-year recognition of the LSS4 asset. The report highlights that the company is currently trading at 4x FY27 PER, which is considered “unwarranted given the strong earnings momentum.”
Key risks identified for the positive outlook include the potential for lower-than-expected work orders from customers, unforeseen project delays, and an escalation in project execution costs.
Based on this assessment, TA SECURITIES has issued a BUY recommendation, setting a target price (TP) of RM0.25, which represents a potential upside of 25.0% from the last traded price of RM0.20.
