The research house said UMW-OG's prospective deals in the Middle East and a contract for Naga 8 would be potential re-rating catalysts. “We cut our FY14 EPS to impute bidding-related costs. We continue to value the stock at 21.2 times CY16 P/E, a 30% premium over our target market P/E of 16.3 times,” CIMB Research said.
It also downplayed fears about lower oil prices, saying a briefing by management revealed that UMW-OG’s active fleet expansion was ongoing. “After building a solid base in Southeast Asia, it is now eyeing the Middle East, with a maiden contract expected by end-FY15,” it said.
The research house noted management’s optimism about opportunities in the drilling space. “Management was visibly pumped at the prospects of venturing into the Middle East, which would mark the company’s new phase of international expansion after successfully capturing Southeast Asia," it said.
The research house also noted the on-track construction of UMW-OG's latest rigs Naga 7 and Naga 8. Naga 7, slated for completion next month and delivery in Jan 2015, is 97% complete. It has been signed up for work in the Philippines effective January 2015. Naga 8, which is expected to join the fleet in September 2015, is 57% complete and management is understood to be close to sealing a contract for it.
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