Strong O&G growth to drive UMW FY13 earnings

by **Cals** Tue 18 Jun 2013, 15:32

Business & Markets 2013

Written by Zatil Husna of theedgemalaysia.com

Tuesday, 18 June 2013 15:11

KUALA LUMPUR (June 18): UMW HOLDINGS BHD [] would see better earnings for financial year 2103 (FY13) driven by its younger division, oil and gas (O&G) instead the automotive segment, according to a report by Alliance Research.
In a note today, Alliance Research Angeline Chin said that the group’s biggest earnings contributor, the automotive sector would face slow growth as the competition is getting tougher although it would be offset by the strong growth of its O&G division.
Chin said that the O&G sector was boosted by three key highlights, namely 1) recently acquired drilling rig, 2) O&G sector to be listed, and 3) easily secured contracts due to high demand of offshore drilling services.
“Overall, we expect UMW to register a core earnings growth of 16.8% to reach RM1,097.7 million in FY13 underpinned by 3.2% increase in revenue.
“We highlight that demand for offshore drilling services has been propelled by a surge in E&P activities as Malaysia looks to transform itself into a regional oil & gas trading hub by 2020,” Chin added.
She also said that local oilfield service providers (especially for the upstream players) are in the midst moving into a boom cycle, leveraging on the government's interest in promoting the country's petroleum industry and PETRONAS’s planned capex of RM60bn per annum (RM300bn over 5 years).
“We believe UMW is well-positioned to capitalise on PETRONAS’ preference for locally-owned rigs and its continued support in developing local oil & gas service companies.
“More jack-up rigs and lift boats are expected to be deployed in 2013 to meet continuing strong demand within the oil and gas industry. On the other hand, we gather from Rigzone website that jack-up rig utilisation is healthy globally and has increased from 79% one year ago to 83.1% utilisation now,” she said.