Hot Stock Uzma rises 9.5% on proposed rights issue

by **Cals** Wed 19 Mar 2014, 16:34

Hot Stock Uzma rises 9.5% on proposed rights issue

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Wednesday, 19 March 2014 14:57

KUALA LUMPUR (Mar 19): Uzma Bhd rose as much as 9.5% after the oil and gas support-services provider yesterday proposed a renounceable rights issue, expected to raise RM99 million.

The exercise conducts the issuance of up to 132 million new shares at 75 sen each in Uzma, the firm said in an announcement to Bursa Malaysia.

At midday break, Uzma rose 38 sen or 6.6% to RM6.15. The top gainer saw some 3.3 million share exchanged hands. It earlier hit a high of RM6.32.

In a note, Kenanga Research opined the proceeds could be utilised for capital expenditure (capex), such as risk service contracts (RSCs), which the firm has been gunning for.

“Chances for RSC wins are strong given Uzma was a participant in the early studies for some of the marginal fields, which give its in-depth knowledge.

“Overall, we are positive with the exercise as the company intends to utilize the funds for growth,” said Kenanga research analyst Cezzane See.

Public Investment Bank Research echoed as saying the exercise was to entice shareholders to fund Uzma’s special projects seen to provide ‘added attractiveness’.

“We understand Uzma is venturing in the areas of RSCs, enhanced oil recoveries and others this year,” said the Public IB research team, noting this resulted in Uzma’s sharply positive share price movement to-date.

The research team said it retained a ‘neutral’ recommendation at RM6.17 with an unchanged target price (TP) of RM6.17 (ex-rights: RM3.46).

“We see current valuations as having already priced-in these expectations,” it said.

However, Kenanga’s See has upgraded Uzma to ‘outperform’ but maintained TP of RM6.67 (ex-rights: RM3.26).

See said she maintained her earnings forecast, but expects Uzma’s earnings to grow steadily due to higher UzmaPres units, and better wireline and well services take-up rates.

To-date, Uzma’s secured orderbook stands at RM1.6 billion, to last until 2017, and a bid book of RM2.6billion.

Public IB noted Uzma’s diversification within the oil & gas sector will augur well for the oil & gas player.