Uzma – a potential fundamental investment

[i4value]

Uzma is a Bursa energy services company whose ROE over the past decade is about the same as that for my Bursa reference company – Dayang.

The unusual thing is that I could not find any meaningful correlation between its revenue and the Brent crude oil prices. This is from both a one to two years lagging and leading perspectives. I interpret this to mean that its performance is not so linked to crude oil prices.

When you compare its ROE trend with its share price trend, you can see that the share price has yet to catch up with the improved performance. This is a counter worth digging deeper into.

[Reenat]

"The unusual thing is that I could not find any meaningful correlation between its revenue and the Brent crude oil prices."

The likes of UZMA and Dayang are what are called oilfield service companies. They have a contract for services or goods with the oil companies—i.e. Petronas, Shell, Exxon, etc. The contract is usually for a duration, and thus has no direct correlation with the oil prices. They could only make adjustments at the end of an existing contract and push prices higher when the oil prices are higher (thus more demand for these companies).

[i4value]

The capital expenditure of the oil and gas companies are to some extent influence by crude oil prices. Certainly Petronas expenditure have been curtailed when crude oil prices fell. So I would expect that there would be some correlation between the revenue of the oil field services and crude oil prices