WZSATU (7245) - WZSatu - Built for Glory

WZ Satu Berhad (WZSatu - 7245) had been running under the spot light lately as corporate announcement are knocking on the doors in packs. The steel player had saw much diversified business with the emergence of strategic shareholder, which saw new businesses in large infrastructure construction (Highways, Bridges and Sea Ports), as well as mining concession in bauxite extraction.

When royal meant business

The rise of WZSatu is much attributable to Dato Sri Tengku Uzir bin Tengku Dato Ubaidillah, which is the executive chairman and CEO of the group. DS Tengku Uzir had been buying back shares of WZSatu from the open public since 2014 even at the peaking heights of RM 2.70 before the bonus issue. The latest sighted buy back from DS Tengku Uzir saw his stake growing to almost 25%. (Excluding warrants)

We would reflect that DS Tengku Uzir consistent buy back despite of the fluctuation price in the open market will be a good sign of confidence that there will be even greater event and future that is set in for WZSatu.

WZSatu going strong in infrastructure construction

It is notable that WZSatu only had appetite in infrastructural construction, especially on highway.
Last year, WZSatu had bagged in a RM 499 million worth of highway construction contract from IJM for a 26km stretch in the WCE. Other notable contracts that are bagged in during year 2015 will be the RM 124 million elevated bridge structure over Bayan Lepas from UEM Construction as well as a RM 58.22 million contract for extension work in Kuantan Port expansion project from Fajarbaru Builder.

For 2016,  WZSatu started to add on to it's book order with RM 65.37 million RAPID contracts (RM 46.75 million for installation of pipes and fittings, and RM 18.62 million for pipe spool pre-fabrication) and a RM 43 million highway upgrade work at Perak (Teluk Intan - Kg. Lekir) for 24 mths, commencing 10th June 2016.
The total book order is currently standing at a healthy level of RM 790 million.

We expect WZSatu to be able to clinch more construction work in the 2H of 2016, especially for highway packages from DASH, SUKE, EKVE and SKVE. Aside from contract in the peninsula Malaysia, WZSatu had formed a JV with PKMM Bina Sdn Bhd to bid for a portion of upgrade work in the Pan Borneo Highway.

Barring unforeseen circumstances, familiar sources are optimistic on WZSatu pushing book order near to RM 1 billion by the end of 2016.

WZSatu Silk Road

The latest announcement of the sale of Silk Highway to WZSatu had received mixed reaction from the public. While the Silk Highway had yet to see positive operating cash flow, it would soon become a silk road for public in the mere future with emerging township new township in Bangi, Semenyih and Kajang.

Adding the highway into the group asset portfolio will definitely open up window of opportunity for cornerstone investor in the future when the highway become profitable. This could be one of the core reason in the consistent open market buy back from DS Tengku Uzir.

The latest stint in the local Malaysian market had saw a change shift of appetite in EPF investment style, with preferences towards company with steady revenue such as highway concession. Ekovest had been tipped off in the market on EPF buying in due to it's DUKE highway concession and DUKE Extension, which is a core reason that saw Ekovest share price appreciated greatly.

SILK highway resemble a gem that is going to be uncovered in the future. When it turn profitable under the belt of WZSatu, the company will definitely see a great re-rating on share price valuation.

Although the share price chart will reflect WZSatu trading on a long term declining trend, we would like to point out on a possible turnaround event on WZSatu as the stock had broken away from a long term resistant line as highlighted in green.
The possible rebound will be backed by
- Project Book Order of RM 790 million secured in 2H 2015 until current 1H 2016.
- Restart of bauxite mining activities in 15 July 2016.
- Potential corporate exercise for fund raising activities in future for asset purchase.

WZSatu will be an interesting company to be looked out. Beside it's growing construction business, we continue to see bullish demand in the global need for aluminum, which raw material is bauxite. WZSatu will be able to see a restart in Bauxite Mining after 15th July 2016, where the extended ban will end.

A short term outlook will see WZSatu hitting a possible RM 1.20, with a longer term outlook at RM 1.50.

Bone's TP : RM 1.20

WZSATU (7245) - WZSatu - Built for Glory