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Thursday, July 16, 2015

Water deal can generate up to RM80mil revenue for Uzma

PETALING JAYA: Uzma Bhd’s D18 water injection facility (WIF) contract, which it recently won from Petronas Carigali Sdn Bhd, is expected to generate an annual revenue of up to RM80mil.
Kenanga Research said the annual revenue forecast was based on the contract’s value of RM400mil.
It said the WIF contract was expected to generate annual earnings before interest and tax amounting to RM16mil.
“Capital expenditure (capex) for the water injection unit is estimated at US$70mil (RM266mil). Assuming 80% debt financing, its net gearing is expected to climb to 0.8 times from 0.2 times previously, assuming an exchange rate of RM3.80 to the US dollar, which is still manageable given its five-year recurring cash flow from the new contract secured.
“Petronas also has the right to purchase the water injection unit at the end of the contract, which further allays concerns of inability to recover the asset capex cost,” said Kenanga Research in its report yesterday.
Hong Leong Investment Bank, meanwhile, said in its report that it was positive on the WIF contract win, given the current low oil price.
“This re-emphasises our investment thesis that Uzma’s exposure to exploration and production operation expenditure, instead of capex spending, should help it to weather through this challenging period.
“We believe this maiden WIF project in Malaysia, if executed well, will provide plenty of opportunities for other mature fields in Malaysia. We estimate the payback period for the WIF at around five to six years.” the research house added.

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