Wah Seong Corp (Dec 7, RM1.98)
Maintain buy with revised target price RM2.50 from RM3.10: Wah Seong is likely to be busy with Malaysian contracts next year, underpinned by Petroliam Nasional Bhd’s (Petronas) record high RM300 billion five-year capital expenditure. We understand Wah Seong has been receiving inquiries for pipe-coating jobs in Malaysia, indicating potentially robust replenishment for the company.
It is likely to be a direct beneficiary of Petronas’ plan to replace ageing facilities as 60% of the national oil company’s major producing oil fields in Malaysia average 26 years old.
Wah Seong is now primed to strengthen its pipe-coating market share in Malaysia, especially with the RM15 billion North Malay basin project (construction of a 200km of pipeline to transfer gas from nine fields to Kerteh, Terengganu) to be rolled out in the near term, given Petronas’ ambitious timeline of first production by 2013.
Bredero Shaw, a subsidiary of Canada-listed ShawCor Ltd, announced end-November that it had received a letter of intent from Mitsui and Co for pipeline coating jobs (US$400 million or RM1.3 billion) for the Ichthys LNG project, subject to a final investment decision by the project anchors, Japan’s Inpex and France’s Total.
This comes after Wah Seong had lost the Wheastone LNG project (US$170 million) on Oct 11 to Bredero Shaw. We are disappointed with this news, but Wah Seong could still benefit from the duopoly market in Malaysia given that Bredero Shaw’s plant in Kuantan, Pahang, is likely to be fully utilised next year for both Australian projects.
We cut FY12 profit by 10% and FY13F by 4%, including adjusting for the lost bids. Our target price is also reduced to RM2.50, pegged to 15 times revised FY12 earnings per share, in line with its six-year mean multiple. We continue to like Wah Seong for its track record and niche expertise in pipe-coating. — Hwang DBS Vickers, Dec 7
This article appeared in The Edge Financial Daily, December 8, 2011.
Maintain buy with revised target price RM2.50 from RM3.10: Wah Seong is likely to be busy with Malaysian contracts next year, underpinned by Petroliam Nasional Bhd’s (Petronas) record high RM300 billion five-year capital expenditure. We understand Wah Seong has been receiving inquiries for pipe-coating jobs in Malaysia, indicating potentially robust replenishment for the company.
It is likely to be a direct beneficiary of Petronas’ plan to replace ageing facilities as 60% of the national oil company’s major producing oil fields in Malaysia average 26 years old.
Wah Seong is now primed to strengthen its pipe-coating market share in Malaysia, especially with the RM15 billion North Malay basin project (construction of a 200km of pipeline to transfer gas from nine fields to Kerteh, Terengganu) to be rolled out in the near term, given Petronas’ ambitious timeline of first production by 2013.
Bredero Shaw, a subsidiary of Canada-listed ShawCor Ltd, announced end-November that it had received a letter of intent from Mitsui and Co for pipeline coating jobs (US$400 million or RM1.3 billion) for the Ichthys LNG project, subject to a final investment decision by the project anchors, Japan’s Inpex and France’s Total.
This comes after Wah Seong had lost the Wheastone LNG project (US$170 million) on Oct 11 to Bredero Shaw. We are disappointed with this news, but Wah Seong could still benefit from the duopoly market in Malaysia given that Bredero Shaw’s plant in Kuantan, Pahang, is likely to be fully utilised next year for both Australian projects.
We cut FY12 profit by 10% and FY13F by 4%, including adjusting for the lost bids. Our target price is also reduced to RM2.50, pegged to 15 times revised FY12 earnings per share, in line with its six-year mean multiple. We continue to like Wah Seong for its track record and niche expertise in pipe-coating. — Hwang DBS Vickers, Dec 7
This article appeared in The Edge Financial Daily, December 8, 2011.
