WASEONG (5142) - Wah Seong Corp - Pumping up a double record
Target RM1.88 (Stock Rating: ADD)
As the Polarled pipe-coating contract got underway, Wah Seong pumped up a highest-ever 4Q net profit, which led to a record FY14 core net profit that met our expectation at 103% of our forecast, but was ahead of consensus at 116% of its estimates. We continue to value the stock at a CY16 P/E of 10.5x, still at a 30% discount to 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.
Record FY14 core net profit soars 308% yoy
Wah Seong booked a record 4Q14 net profit that surged a robust 174% yoy, powered by the smooth execution of the RM627m pipe-coating contract for the Polarled project in Norway. Commencing in 4Q13, the contract was 60% completed as at 31 Dec 2014 and is expected to finish by mid-FY15. Excluding a RM6m asset impairment in 2Q14, FY14 core net profit soared 308% to a new record, thanks to the ongoing Polarled contract and the RM232m North Malay Basin (NMB) contract, which was completed in 2Q14. The company announced a final DPS of 3.17 sen, taking full-year DPS of 5.67 sen, trailing our forecast of 7 sen.
RM1.2bn order book
As at 31 Dec 2014, Wah Seong had orders worth RM1.2bn, of which RM253m were secured in 4Q14. Of the RM1.2bn outstanding order book, 59% came from oil & gas, 24% from renewable energy and 17% from industrial trading and services. Management confirmed that there have been no contract re-negotiations or re-bids so far. The company’s tender book is worth RM5bn, of which 95% comprises oil & gas jobs.
More focus on long-term income
In FY15, Wah Seong is set to book higher contributions from its associates, Petra and a JV with Alam. Long-term marginal field contributions from 26.9%-owned Petra and a 49:51 JV on five vessels with Alam should lend more stability to Wah Seong's bottomline, which is currently driven by lumpy pipe-coating contracts. A third source of long-term income could be Remcoat, Petronas’s home-grown coating product that Wah Seong will manufacture and market exclusively to the global market.
Source: CIMB Daybreak - 27 February 2015
Target RM1.88 (Stock Rating: ADD)
As the Polarled pipe-coating contract got underway, Wah Seong pumped up a highest-ever 4Q net profit, which led to a record FY14 core net profit that met our expectation at 103% of our forecast, but was ahead of consensus at 116% of its estimates. We continue to value the stock at a CY16 P/E of 10.5x, still at a 30% discount to 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.
Record FY14 core net profit soars 308% yoy
Wah Seong booked a record 4Q14 net profit that surged a robust 174% yoy, powered by the smooth execution of the RM627m pipe-coating contract for the Polarled project in Norway. Commencing in 4Q13, the contract was 60% completed as at 31 Dec 2014 and is expected to finish by mid-FY15. Excluding a RM6m asset impairment in 2Q14, FY14 core net profit soared 308% to a new record, thanks to the ongoing Polarled contract and the RM232m North Malay Basin (NMB) contract, which was completed in 2Q14. The company announced a final DPS of 3.17 sen, taking full-year DPS of 5.67 sen, trailing our forecast of 7 sen.
RM1.2bn order book
As at 31 Dec 2014, Wah Seong had orders worth RM1.2bn, of which RM253m were secured in 4Q14. Of the RM1.2bn outstanding order book, 59% came from oil & gas, 24% from renewable energy and 17% from industrial trading and services. Management confirmed that there have been no contract re-negotiations or re-bids so far. The company’s tender book is worth RM5bn, of which 95% comprises oil & gas jobs.
More focus on long-term income
In FY15, Wah Seong is set to book higher contributions from its associates, Petra and a JV with Alam. Long-term marginal field contributions from 26.9%-owned Petra and a 49:51 JV on five vessels with Alam should lend more stability to Wah Seong's bottomline, which is currently driven by lumpy pipe-coating contracts. A third source of long-term income could be Remcoat, Petronas’s home-grown coating product that Wah Seong will manufacture and market exclusively to the global market.
Source: CIMB Daybreak - 27 February 2015
