WASEONG (5142) : Wah Seong Corp - On track to a record year
Target RM2.65 (Stock Rating: ADD)
As the Polarled pipe-coating contract got underway, Wah Seong pumped up a record 9M core net profit that broadly met our expectations at 76% of our FY14 forecast, but was ahead of consensus at 89% of its forecast. With more contributions from Polarled, as well as associates Petra and a JV with Alam, Wah Seong is set for a record year in FY14. We continue to value the stock at a CY16 P/E of 14.8x, still at a 30% discount to the P/E of the oil & gas big caps. The shift from project-based income to annuity-like earnings is a long-term positive and a potential re-rating catalyst that supports our Add rating.
3Q net profit surges 608% yoy
Wah Seong booked a 3Q14 net profit that surged a robust 608% yoy, powered by the smooth execution of the RM627m pipe-coating contract for the Polarled project in Norway. Commencing in 4Q13, the contract is 70% completed and is expected to finish by mid-FY15. 9M14 core net profit soared 805% to a new record, thanks to the ongoing Polarled contract and the RM232m North Malay Basin (NMB) contract, which was completed in 2Q14. The absence of an interim dividend was expected.
RM1.4bn order book
As at 30 Sep 2014, Wah Seong had orders worth RM1.4bn, of which 66% came from oil & gas, 21% from renewable energy and 13% from industrial trading and services. The company’s tender book is worth RM5.5bn, of which 65% consists of oil & gas jobs, with 60% in the pipe-coating segment. We understand that the jobs are in markets that include Central Asia and the Middle East.
More focus on gas contracts
Over the past few years, Wah Seong has taken on more gas projects, which include the RM370m Turkmenistan Block 1 in 2008, RM48m PTT Offshore Gas Spur Lines in 2010 and NMB in 2013. Given the oil price fall, the company plans to scout for more gas projects than oil ones. Management stressed that its RM1.4bn order book, which will last for about two years, is intact. The company also benefits from long-term income from its associates, Petra Energy and a JV with Alam Maritim (see overleaf).
Source: CIMB Daybreak - 01 December 2014
Target RM2.65 (Stock Rating: ADD)
As the Polarled pipe-coating contract got underway, Wah Seong pumped up a record 9M core net profit that broadly met our expectations at 76% of our FY14 forecast, but was ahead of consensus at 89% of its forecast. With more contributions from Polarled, as well as associates Petra and a JV with Alam, Wah Seong is set for a record year in FY14. We continue to value the stock at a CY16 P/E of 14.8x, still at a 30% discount to the P/E of the oil & gas big caps. The shift from project-based income to annuity-like earnings is a long-term positive and a potential re-rating catalyst that supports our Add rating.
3Q net profit surges 608% yoy
Wah Seong booked a 3Q14 net profit that surged a robust 608% yoy, powered by the smooth execution of the RM627m pipe-coating contract for the Polarled project in Norway. Commencing in 4Q13, the contract is 70% completed and is expected to finish by mid-FY15. 9M14 core net profit soared 805% to a new record, thanks to the ongoing Polarled contract and the RM232m North Malay Basin (NMB) contract, which was completed in 2Q14. The absence of an interim dividend was expected.
RM1.4bn order book
As at 30 Sep 2014, Wah Seong had orders worth RM1.4bn, of which 66% came from oil & gas, 21% from renewable energy and 13% from industrial trading and services. The company’s tender book is worth RM5.5bn, of which 65% consists of oil & gas jobs, with 60% in the pipe-coating segment. We understand that the jobs are in markets that include Central Asia and the Middle East.
More focus on gas contracts
Over the past few years, Wah Seong has taken on more gas projects, which include the RM370m Turkmenistan Block 1 in 2008, RM48m PTT Offshore Gas Spur Lines in 2010 and NMB in 2013. Given the oil price fall, the company plans to scout for more gas projects than oil ones. Management stressed that its RM1.4bn order book, which will last for about two years, is intact. The company also benefits from long-term income from its associates, Petra Energy and a JV with Alam Maritim (see overleaf).
Source: CIMB Daybreak - 01 December 2014
