CIMB Equities Research says investors should accumulate UMW Oil & Gas Corp Bhd (UMW O&G) and ride the excitement as the company adds new jack-ups to take advantage of the high demand for the asset class in Southeast Asia.
The recommendation was made after UMW O&G secured a US$51.3 million (RM162.62 million) contract for its Naga 5 jack-up to support its client’s drilling campaign in the Gulf of Mottama, Myanmar, for 250 days, effective next month.
“This contract is a testimony of the management’s ability to yet again secure contracts at above the market rate. Only last week, the management closed a US$166,667-per day deal for under-construction Naga 7 to start working in the Philippines for Frontier Oil in mid-January 2015,” CIMB Research added.
It values the stock at 23.4x calendar 2015 price to earnings, a 40 per cent premium over its implied target market P/E of 16.7x.
“Recognising Myanmar and Vietnam as the regional hotspots, the company has ventured into these markets through GAIT 6 and now Naga 5 in Myanmar, and Naga 2, GAIT 3 and Naga 3 in Vietnam,” it added.