Uzma Berhad: A Deep Dive Analysis – Transitioning from Geology to Geospatial

Date of Report: Tuesday, 18 February 2025

Broker: UOB Kay Hian

Introduction to Uzma Berhad

Uzma Berhad, a prominent oil and gas (O&G) company, has been making strides in its field by offering integrated reservoir services to upstream players. With a diversified portfolio encompassing geoscience and petroleum engineering, drilling and well services, and project oilfield operations, Uzma is now exploring new horizons in the geospatial industry. With an enticing upside potential of 64.1% and a target price of RM1.08 per share, Uzma is a stock to watch.

Key Highlights and Transition to Geospatial

Uzma is leveraging its early days in geology to pivot into geospatial technology. Its recent venture into space, marked by the launch of Malaysia’s first privately owned Earth Observation (EO) satellite UzmaSAT-1, signifies a groundbreaking move. Launched via a SpaceX shuttle on 14 January 2025, UzmaSAT-1 successfully captured its first two images within 48 hours. This milestone not only sets a national precedent but also positions Uzma as a leader in the emerging geospatial industry.

The company’s geospatial division, Digital Earth, is expected to replicate Uzma’s geological success by creating a high barrier of entry, complex project management systems, and funding-intensive technological solutions. With Petronas as its biggest client for Digital Earth, Uzma is well-poised to capitalize on this first-mover advantage in Malaysia’s growing space economy.

Non-O&G Diversification and Growth

Uzma’s diversification efforts have paid off, with its non-O&G revenue reaching 40% as of 1QFY25, nearing its target of 30% overseas revenue. The company’s Kuala Muda Large Scale Solar (LSS4) project in Kedah is set to contribute RM20-25 million annually starting 2QFY25. Additionally, its subcontract for a solar plant under the Corporate Green Power Programme aims for a commercial operation date (COD) by December 2025.

Uzma’s LNG startup under Energy Trading has emerged as the top domestic LNG distributor through its innovative Virtual Pipeline System. These initiatives underline Uzma’s commitment to achieving a recurring income mix of 60% by FY25, up from 40% in FY23.

Oil and Gas Segment: Strength and Expansion

Despite its diversification, Uzma continues to strengthen its O&G segment. The company is rolling out new integrated well services contracts and plans to launch SARA, a smaller water injection unit, by April 2025. This complements its larger unit, MARSYA, and supports the South Furious Waterflood Phase 2 (SF30) project.

Uzma is also expanding its regional footprint, with its overseas O&G order book growing to 8%, primarily from Thailand and the Philippines. Future growth is expected from potential markets in Indonesia and the Middle East.

Financial Performance and Projections

Uzma’s financials reflect its robust growth trajectory. The company’s net turnover is projected to rise from RM600.3 million in 2024 to RM833.6 million in 2025, with EBITDA climbing to RM152.0 million. Net profits are expected to increase to RM58.6 million in FY25, supported by a PE of 5.8x and an attractive dividend yield of 3.0%.

However, the company’s net debt-to-equity ratio is anticipated to rise to 102.5% due to its capital-intensive projects. Despite this, Uzma’s ability to maintain strong operating margins and recurring income streams underscores its financial resilience.

Environmental, Social, and Governance (ESG) Commitments

Uzma is committed to sustainability, aiming for a 40% non-O&G revenue mix by FY25 and long-term solar revenue exceeding RM1 billion by 2030. The company also boasts a diverse workforce, with over 20% female representation, and maintains a low Lost Time Injury Frequency (LTIF).

Governance remains a priority, with 5 out of 8 board members being independent and possessing extensive industry expertise.

Valuation and Recommendation

UOB Kay Hian maintains a “Buy” recommendation for Uzma, with a target price of RM1.08 based on a 10x PE valuation. The current share price retracement, influenced by dilution from corporate exercises, presents an attractive entry point for investors. Uzma’s strong O&G order book and promising non-O&G ventures make it a compelling investment opportunity.

Space Economy and First-Mover Advantage

The global space economy is projected to reach US\$1.8 trillion by 2035, with Malaysia’s share estimated at RM10 billion by 2031. Uzma’s partnership with Satellogic and its achievements in the satellite space position it as a key player in this high-growth sector. The company’s unique capabilities in emission monitoring and disaster management further enhance its value proposition.

Conclusion

Uzma Berhad is at an exciting crossroads, transitioning from its geological roots to becoming a trailblazer in geospatial technology. Its diversified revenue streams, strong O&G order book, and pioneering space ventures position it for sustained growth. With a solid “Buy” rating and an upside potential of 64.1%, Uzma offers a compelling case for investors looking to capitalize on the energy and geospatial sectors.

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