Wah Seong Corp Bhd (Jan 26, RM2.10)
Maintain buy at RM2.10 with target price of RM2.50: Wah Seong’s two pipe coating plants in Louisiana, the US, that cost US$20 million (RM60.8 million) will be ready by 2H12, and it has been pre-qualified for projects in the Gulf of Mexico. These plants will be operated by a joint venture with Insituform Technologies, a subsidiary of US-listed Aegion.
The JV will springboard Wah Seong’s entry into this region by leveraging on its partner’s infrastructure. Brazil could be another massive market for Wah Seong to venture into after it is established in the region.
Despite losing two large contracts to Bredero Shaw in October and November 2011, Australia still offers huge potential for Wah Seong because of the large number of liquified natural gas (LNG) projects there. It is bidding for contracts at Julimar and Ichthys (deepwater portion) that could be worth US$150 million in total.
The Browse LNG project is also in the pipeline after some delays as development cost continues to climb. Wah Seong will be a prime beneficiary of the duopoly pipe coating market for the next two years as Bredero Shaw will have its hands full.
There are about 800km of pipelines that are over 30 years old that need to be replaced soon. And Wah Seong stands to gain pipe coating market share in Malaysia with the 2013 deadline for first production for the RM15 billion North Malay basin project.
Wah Seong is looking for potential mergers and acquisitions to boost the contribution for its non-oil and gas division, which we believe is part of the IPO for its demerger exercise to unlock value for the company. — HwangDBS Vickers Research, Jan 26
Maintain buy at RM2.10 with target price of RM2.50: Wah Seong’s two pipe coating plants in Louisiana, the US, that cost US$20 million (RM60.8 million) will be ready by 2H12, and it has been pre-qualified for projects in the Gulf of Mexico. These plants will be operated by a joint venture with Insituform Technologies, a subsidiary of US-listed Aegion.
The JV will springboard Wah Seong’s entry into this region by leveraging on its partner’s infrastructure. Brazil could be another massive market for Wah Seong to venture into after it is established in the region.
Despite losing two large contracts to Bredero Shaw in October and November 2011, Australia still offers huge potential for Wah Seong because of the large number of liquified natural gas (LNG) projects there. It is bidding for contracts at Julimar and Ichthys (deepwater portion) that could be worth US$150 million in total.
The Browse LNG project is also in the pipeline after some delays as development cost continues to climb. Wah Seong will be a prime beneficiary of the duopoly pipe coating market for the next two years as Bredero Shaw will have its hands full.
There are about 800km of pipelines that are over 30 years old that need to be replaced soon. And Wah Seong stands to gain pipe coating market share in Malaysia with the 2013 deadline for first production for the RM15 billion North Malay basin project.
Wah Seong is looking for potential mergers and acquisitions to boost the contribution for its non-oil and gas division, which we believe is part of the IPO for its demerger exercise to unlock value for the company. — HwangDBS Vickers Research, Jan 26
