Oil and gas
Maintain overweight: While Wah Seong Corp Bhd (WSC) has again lost out to Bredero Shaw on the Ichthys pipe-coating project, the short-term disappointment will be compensated for by the potential of more lucrative domestic projects.
We remain optimistic on its order book visibility for pipe-coating projects. WSC remains a “buy” with an unchanged RM3.10 target price, based on 14 times 2012 earnings per share. On a larger perspective, the Ichthys award denotes the growing importance of gas resources — positive for the pipe players. The oil and gas sector remains an “overweight”.
This is Bredero Shaw’s second successful major pipe-coating job win following the recent Wheatstone LNG triumph, which has a contract value of estimated US$170 million or RM542 million (for a 300km job involving 10-inch to 44-inch pipe). Putting things into perspective, this also denotes the growing importance of gas resources as a clean energy and the continuous capital expenditure drive in this segment.
WSC is likely to focus on domestic jobs to offset the recent disappointments. In both instances it lost out to Bredero Shaw. WSC’s loss is a slight disappointment for we had expected WSC to secure at least one of those two projects.
Nevertheless, we remain optimistic on WSC’s prospects of making up for the opportunity loss from the overseas tenders. We foresee strong visibility for WSC to grow its pipe-coating backlog via domestic orders (pipeline replacement and North Malay basin).
WSC’s outstanding order book remains steady at RM1.2 billion as at September this year. We see it as a proxy play to Petroliam Nasional Bhd’s domestic development programmes and worldwide gas production.
Valuations are undemanding, at sub-10 times one-year forward price-earnings ratio, which is one standard deviation below mean of 9.5 times, which we think, underscores its near-term job wins and earnings potential. — Maybank IB Research, Nov 24
This article appeared in The Edge Financial Daily, November 25, 2011.
Maintain overweight: While Wah Seong Corp Bhd (WSC) has again lost out to Bredero Shaw on the Ichthys pipe-coating project, the short-term disappointment will be compensated for by the potential of more lucrative domestic projects.
We remain optimistic on its order book visibility for pipe-coating projects. WSC remains a “buy” with an unchanged RM3.10 target price, based on 14 times 2012 earnings per share. On a larger perspective, the Ichthys award denotes the growing importance of gas resources — positive for the pipe players. The oil and gas sector remains an “overweight”.
This is Bredero Shaw’s second successful major pipe-coating job win following the recent Wheatstone LNG triumph, which has a contract value of estimated US$170 million or RM542 million (for a 300km job involving 10-inch to 44-inch pipe). Putting things into perspective, this also denotes the growing importance of gas resources as a clean energy and the continuous capital expenditure drive in this segment.
WSC is likely to focus on domestic jobs to offset the recent disappointments. In both instances it lost out to Bredero Shaw. WSC’s loss is a slight disappointment for we had expected WSC to secure at least one of those two projects.
Nevertheless, we remain optimistic on WSC’s prospects of making up for the opportunity loss from the overseas tenders. We foresee strong visibility for WSC to grow its pipe-coating backlog via domestic orders (pipeline replacement and North Malay basin).
WSC’s outstanding order book remains steady at RM1.2 billion as at September this year. We see it as a proxy play to Petroliam Nasional Bhd’s domestic development programmes and worldwide gas production.
Valuations are undemanding, at sub-10 times one-year forward price-earnings ratio, which is one standard deviation below mean of 9.5 times, which we think, underscores its near-term job wins and earnings potential. — Maybank IB Research, Nov 24
This article appeared in The Edge Financial Daily, November 25, 2011.
