KUALA LUMPUR – Maybank Investment Bank Bhd (Maybank IB) has maintained its “buy” call on Wah Seong Corporation Bhd (Wah Seong) following its improving jobs win prospects worth RM162.5 million from BW Energy Gabon SA, a company incorporated in Gabon, Africa.
The 13-month contract was awarded for the completion of the engineering, procurement, construction and installation of oil and gas processing and compression module and skid units.
With a robust outlook for job tenders, Wah Seong is poised to grasp the opportunities ahead, Maybank IB said.
“Valuations are still undemanding (six to eight times financial year 2022 (FY2022) until FY2023 price earnings ratio), for the market has yet to fully embrace the strength of the earnings turnaround outlook, especially for its Qatari and Malaysia prospects, which would feature prominently from FY2022,” it said in a note today.
Therefore, Maybank IB maintains the target price of RM1.20.
Meanwhile the research house continues to remain positive on its improving order book replenishment visibility.
“The contract value is relatively sizeable, 14% of its order backlog (RM1.2 billion as of March 2021).
“This job win will elevate its order backlog to RM1.4 billion, an increase of 14%,” it said, adding an expectation the company will make RM13 million to RM17 million in pre-tax profit for this project.
Besides, Maybank IB said the earnings estimates are unchanged, on expectation of its order book growing to RM2 billion by FY2021 from RM1.2 billion in FY2020.
“Winning the Qatar pipe coating jobs would be a key catalyst, for they would offer a similar earnings impact to the completed NordStream2 project.
“We estimate that the Qatar jobs alone could potentially offer Wah Seong RM180 million in net profit in 2021 to 2024,” it added. – Bernama, June 3, 2021
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