KUALA LUMPUR (Nov 16): Maybank Investment Bank Research is maintaining its Buy call on Wah Seong Corp with a RM3.10 target price.
It said on Wednesday a weaker 3Q11 net profit (-19% QoQ) was due mainly to an RM11 million forex loss. This aside, 9M11 core net profit was within expectation (72% of our full-year forecasts).
“We maintain our forecasts. Overall, pipe-coating visibility remains strong. We see domestic projects dominating new orders over the next few quarters. WSC remains a Buy with a RM3.10 target price (14 times 2012 EPS),” it said.
It said the 3Q11 core net profit of RM32m (+17 % QoQ) took 9M11 core net profit to RM102 million (+230% YoY), in line with our forecasts. The underlying growth was driven by higher revenue (+18% QoQ) and an expanded EBIT margin (+0.7-ppt QoQ), driven primarily, we reckon, by its pipe-coating division (i.e. Gorgon and domestic jobs).
“We expect 2H performance to mirror 1H with the AP LNG (US$45 million) and Kebabangan (RM80 million to RM90 million) projects sustaining earnings visibility up to 2Q 2012.
Maybank IB Research said although WSC lost out on Wheatstone’s pipe-coating job, it expects domestic jobs (i.e. pipeline replacement & North Malay basin) and potentially Inpex’s Ichthys LNG project (measuring 885km of pipelines) to fill up capacity over the next few years.
“Our 2012-13 forecasts incorporate RM600 million p.a. of pipe-coating revenue, of which outstanding is about RM400 million, we estimate,” it said, adding that outstanding orderbook remains steady at RM1.2 billion as at September 2011.
“We see WSC as a proxy play to Petronas’ domestic development programmes, and worldwide gas, leveraging on Australia’s multiple LNG project sanctions.
“The stock now trades at sub-10 times one-year forward PER which is at one standard deviation below mean of 9.4 times, which we think, underscores its near-term job wins and earnings potential. On the corporate front, there is no new update on the proposed listing of Wasco, which has been deferred since August,” it said.
It said on Wednesday a weaker 3Q11 net profit (-19% QoQ) was due mainly to an RM11 million forex loss. This aside, 9M11 core net profit was within expectation (72% of our full-year forecasts).
“We maintain our forecasts. Overall, pipe-coating visibility remains strong. We see domestic projects dominating new orders over the next few quarters. WSC remains a Buy with a RM3.10 target price (14 times 2012 EPS),” it said.
It said the 3Q11 core net profit of RM32m (+17 % QoQ) took 9M11 core net profit to RM102 million (+230% YoY), in line with our forecasts. The underlying growth was driven by higher revenue (+18% QoQ) and an expanded EBIT margin (+0.7-ppt QoQ), driven primarily, we reckon, by its pipe-coating division (i.e. Gorgon and domestic jobs).
“We expect 2H performance to mirror 1H with the AP LNG (US$45 million) and Kebabangan (RM80 million to RM90 million) projects sustaining earnings visibility up to 2Q 2012.
Maybank IB Research said although WSC lost out on Wheatstone’s pipe-coating job, it expects domestic jobs (i.e. pipeline replacement & North Malay basin) and potentially Inpex’s Ichthys LNG project (measuring 885km of pipelines) to fill up capacity over the next few years.
“Our 2012-13 forecasts incorporate RM600 million p.a. of pipe-coating revenue, of which outstanding is about RM400 million, we estimate,” it said, adding that outstanding orderbook remains steady at RM1.2 billion as at September 2011.
“We see WSC as a proxy play to Petronas’ domestic development programmes, and worldwide gas, leveraging on Australia’s multiple LNG project sanctions.
“The stock now trades at sub-10 times one-year forward PER which is at one standard deviation below mean of 9.4 times, which we think, underscores its near-term job wins and earnings potential. On the corporate front, there is no new update on the proposed listing of Wasco, which has been deferred since August,” it said.
