TA Securities initiate coverage on
UMW Oil & Gas Corporation Bhd (UMW-OG) with a Buy recommendation and
Target Price of RM3.36 based on 22x FY14 P/E. They believe that 22x
FY14 PER is not excessive given that Malaysian-listed mid-large cap
upstream O&G counters with market cap between USD2bn-3.5bn currently
trade at an average of 21x CY14 P/E. This includes Bumi Armada (19x),
MMHE (20x), Dialog Group (25x). Their Target
Price translates into 19.8x FY15 P/E whereby FY15 would see the
full-year contribution of UMW-OG’s entire fleet of 6 drilling rigs and 5
HWUs. They expect UMW Oil & Gas dividend yield zero for the next
few years.
Kenanga give UMW-OG fair value at
RM3.33 per share, based on CY14 21.0x PER. This is at a small discount
to the PER of 22.0x which they ascribed to Sapurakencana (SKPETRO; OP;
TP: RM4.72), in terms of relatively smaller size than the latter. Whilst
this is at a premium to its global peers’ weighted average CY14 PER of
7.7x, they believe UMW-OG should be rated against domestic peers given
that the major contributor to group earnings is mainly derived from
Malaysia. They also expect UMW Oil & Gas dividend yield zero for the
next few years.
HLIB expects price to earnings ratio (P/E) to
fall to 14 times in FY15 with a conservative assumption of additional
one rig per year after FY14. HLIB initiated coverage on UMW O&G with a “buy” call and a
target price of RM3.36 based on 20 times average FY14 to FY15 P/E as the
full contribution from Naga 5 and Naga 6 will only be reflected in
FY15.
