To boldly go into space economy

THE global space economy is set to become a multi-trillion dollar industry over the next decade.

While the prospects are nothing short of exciting, one ought to remember that this is a highly risky, costly and complex business.

In short, the space economy is not for everyone.

So, when a Malaysian company with a market capitalisation of just RM331mil and whose borrowings far exceed its cash levels announced the plan to launch its own satellite, it is only natural to be sceptical.

The fact that Uzma Bhd has been an oil and gas services provider for the most of its corporate history but is now gradually diversifying into a starkly different space business adds to the scepticism.

Uzma founder and chief executive officer Datuk Kamarul Redzuan Muhamed, however, has huge faith in this business.

In fact, his team is already working on the ideation for future satellites, ahead of the launch of UzmaSAT-1.

While Kamarul is clear not to over-hype the venture, he expresses confidence that the space business has the potential to “complement” Uzma’s O&G services.

Over time, it is expected to grow into a significant contributor to the company’s portfolio should the venture progress well.

Optimism aside, a simple question lingers – can Uzma pull off this grand ambition?

Is Kamarul biting off more than he can chew?

All said and done, the success of a listed company like Uzma in the space business would surely excite more home-grown companies to jump on the bandwagon.

In recent years, Uzma has been building its presence in what the company calls the Digital Earth segment.

The venture started via its space business arm, Geospatial AI Sdn Bhd, by providing data analytics using third-party satellite imagery.

The imagery is processed by an in-house developed system called Digital Earth, which then provides “actionable intelligence”.

The system is industry-agnostic and can be used to, among others, forecast flood risks, increase agricultural output, enhance construction decisions in the real estate industry, as well as enable an efficient transportation network.

At this point, Geospatial AI serves the energy and plantation industries. While Kamarul declines to name the clients, he says the team serves an Africa-based plantation and a Malaysian energy company.

Uzma is also working with the Malaysian Palm Oil Board.

Uzma will be launching its UzmaSAT-1 satellite on a Space X rocket within days from the Vandenberg Space Force Base in Santa Barbara, United States.

This will be Malaysia’s 13th satellite since the country entered the space club with the launch of the Measat-1 satellite in 1996.

While most of the satellites launched were for communications, UzmaSAT-1 will focus on Earth observation.

The launch was supposed to be late last year, but was delayed due to Space X’s circumstances.

Nonetheless, the launch will mark a milestone for Uzma as it celebrates its silver jubilee this year.

With UzmaSAT-1, Geospatial AI will no longer be solely reliant on third-party satellite imagery.

Kamarul expects the satellite to break even within 12 months.

“This timeline reflects our confidence in the growing market awareness and adoption of Earth observation applications across key sectors such as agriculture, plantations, energy, defence and disaster response.

As for the overall space business, he expects it to be profitable upon “maturity”.

“This will take some time as we gain more traction among industry players on the services we are offering.

“It’s a marathon, and requires the agility and adaptability that we possess.

“While we have grown considerably during the gestation period, we expect the growth to be more apparent once UzmaSAT-1 is launched,” he tells StarBiz 7.

However, Kamarul declines to comment about the start-up cost for the space business, including the satellite.

He calls it a “trade secret”.

“We won’t spend without a clear projection of opportunities and prospects,” he assures shareholders and lenders.

Governments, including the military, are expected to be the main clientele for UzmaSAT-1.

Apart from Malaysia, Kamarul says the company has been talking to regional governments such as Indonesia, the Philippines, Myanmar and Papua New Guinea.

“That’s the good thing about satellites. They are borderless and scalable.”

Beyond the space business, Uzma has also ventured into the new energy business, particularly solar power generation and geothermal energy services.

Uzma is both a solar farm owner and a provider of engineering, procurement and construction services (EPC) to other solar farm owners.

Uzma’s maiden large-scale solar 4 (LSS4) 50 megawatt (MW) project in Sungai Petani, Kedah, reached its commercial operation date on Sept 25, 2024.

Currently, the company’s total project capacity has hit 150MW, if one includes the projects under its EPC services.

Over a period of four years, Kamarul aims to grow the capacity to 500MW.

Uzma has also diversified into the trading of liquefied natural gas and petrochemicals.

The diversification into space business, new energy and energy trading are undertaken to reduce the impact of the cyclical oil and gas (O&G) business in times of downturn.

Moving forward, Uzma aims for 60% revenue from O&G services and 40% from the three new businesses.

Kamarul reaffirms that the company will continue to grow its core O&G business, including by expanding its global footprint.

One of the markets in focus is the Middle East.

“In the last two years, we have been setting up channels to market in the Middle East.

“We have been actively bidding for projects in the region.

“Of our overall bid-book, 40% are for international projects.

Uzma has won projects in the Middle East, such as Qatar and Sudan. It has also penetrated into Turkiye.

Asked about the returns from the new energy and energy trading segments, Kamarul explains that the internal rate of return for LSS projects is below 10%.

“The returns have been below what we expected, largely due to procurement costs that are 60%-65% of overall costs.

“As for net energy metering projects, the returns are in the teens.”

Kamarul also notes that the return from the energy trading segment is below 10%, but points out that it is a “volume game” business.

Going forward, Kamarul is repositioning Uzma as a company that not only has a resilient earnings base, but is also involved in next-generation ventures such as renewable energy and space business.

Will investors be convinced of this transition?

Considering that the share price has dropped 44% from 2024’s peak, Kamarul and his team have a major challenge to deliver on their promises and to rebuild the positive sentiment on the stock.