Wah Seong to see strong recovery in O&G activities

NST Fri, Feb 10, 2023 09:22am - 1 year View Original

KUALA LUMPUR: Wah Seong Corp Bhd (WSC) is expected to see a strong recovery in activities on the back of higher global capital expenditure spending and oil prices, said Affin Hwang Capital. 

The research house said Wah Seong had seen strong activities pick up in both its pipe coating and engineering segments driven by improvement in global oil and gas (O&G) capital spending on the back of higher oil prices. 

Wah Seong recently won a RM1.1 billion contract for line pipe thermal insulation services for the Qatar and East African Crude Oil (EACOP) project and a RM0.6 billion engineering procurement and construction (EPC) contract to fabricate Yinson's FPSO Agogo topside module. 

"These series of new contract awards have resulted in a healthy outstanding order book of RM3.2 billion (close to 2017 historical high of RM3.6 billion), providing earnings visibility until 2024," it said.

Wah Seong also recently expanded its fabrication capacity by 1.5 times with an upgraded loadout capability by acquiring another Batam yard, allowing it to take on more jobs. 

Affin Hwnag said the company aimed to replenish RM2 billion of contracts in 2023 from its current RM4 billion tender book. 

"The Russia-Ukraine tensions last year had presented both players with more pipe coating work opportunities. 

"Wah Seong's key growth in the coming years will surround Africa (EACOP project) and more Qatar contract potential wins," it said. 

Affin Hwang said there was a lack of comparable peers both locally and globally, with Shawcor (listed on the Toronto Stock Exchange) being the only other pipe coater. 

Waj Seong's foreign shareholding is around the 15-17 per cent level. 

"Based on Bloomberg consensus, its 2023-2024 profit is projected to grow by 44 per cent/11 per cent. 

"Based on these street 2023 estimates, Wah Seong is trading at a forward 7.6 times price per earning (PE) multiple, a discount to the local small-mid cap O&G space valuation of 10-12 times," said Affin Hwang, which did not rate the stock.

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