It said on Tuesday Wah Seong’s 1Q core net profit jumped 28% on-year and formed 20% of its FY15 forecast.
“We deem it broadly in line as we expect a stronger 2H on further European and North American ventures. However, it exceeded consensus by already making up 25% of its full-year number,” said the research house.
CIMB Research continues to value the stock at a CY16 P/E of 10.5 times, a 30% discount to the oil & gas big-caps.
Excluding a RM20mil forex gain that was offset by RM20mil worth of provisions (RM14mil Socotherm lawsuit + RM4mil plantation provision + RM2mil industrial services provision), Wah Seong booked a 1Q15 core net profit that jumped 28% on-year, powered by the smooth execution of the RM627mil pipe-coating contract for the Polarled project in Norway.
Commencing in 4Q13, the contract is expected to finish by end-1H15 although billing is slated to continue until Aug 2015. The absence of an interim dividend was expected.
As at March 31, 2015, Wah Seong had orders worth RM1.2bil, of which 59% came from oil & gas, 25% from renewable energy and 16% from industrial trading and services.
In 1Q15, the company added new contracts valued at around RM396mil, thanks to a Pengerang pipe-manufacturing job (51%), various engineering jobs (32%) and multiple pipe-coating jobs (17%). The company’s tender book is worth RM5bil, of which 80% consists of oil & gas jobs. Further European and North American ventures
CIMB Research says Wah Seong’s management looks forward to potentially secure a second contract – worth no less than US$100mil – with Statoil in Norway, where it already has an onsite, mobile plant that is handling the Polarled pipes and is targeted to further serve the North Sea market.
The contract winner is expected to be announced in Jul/Aug 2015 before the contract commences in 2016.
In addition to Norway, management is bidding for jobs in North America, using 49%-owned Bayou Wasco’s deep-water plant in Louisiana as its key asset.
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