PETALING JAYA: Wah Seong Corp Bhd will flip the nook within the monetary 12 months ending Dec 31, 2022 (FY22) with the latest RM1.1bil line pipe thermal insulation job for the East African Crude Oil Pipeline (EACOP) mission, in line with Hong Leong Funding Financial institution (HLIB) Analysis.
On Feb 22, 2022, Wah Seong stated it had secured EACOP job, positioned between the city of Kabaale in Uganda and the port of Tanga in Tanzania.
HLIB Analysis identified that that is the group’s single largest job win since Nord Stream 2 in 2016, and brings Wah Seong’s order guide to RM2.7bil (from RM1.6bil).
The analysis unit additionally famous that the group’s present tender guide stands at RM4bil, after a convention name with Wah Seong administration.
HLIB Analysis defined that by taking the Nord Stream 2 job win as a case examine, the pre-tax revenue margin for the group’s pipe-coating enterprise (oil and fuel section) ranges from 5.3% to eight.5% in FY17 and FY18, respectively.
“Given a contract interval of 30 months (2.5 years) and a pre-tax revenue margin assumption of seven% flat over the complete contract tenure, we consider that the group will efficiently turnaround into profitability in FY22 to FY23,” stated the analysis home .
It additionally famous that the remainder of the order guide of RM1.6bil will present first rate income and earnings visibility for the following 12 to 18 months.
Additionally, Wah Seong has a robust pipe-coating job outlook amidst the Russia-Ukraine battle and excessive fuel costs over the following 12 to 18 months.
HLIB Analysis stated as Europe is in search of fuel provide alternate options exterior of Russia (to scale back reliance on a serious single power supply), the area must dish out capital expenditure for crude oil and fuel export pipelines from different nations to Europe.
“On condition that Wah Seong is among the world duopoly (alongside Shawcor Ltd) within the pipe coating enterprise, the group stands to be a serious beneficiary of the robust pipe-coating job prospects,” stated the analysis unit.
It additionally famous that Giancarlo Maccagno, who’s the group’s deputy managing director and likewise CEO of Wasco Vitality Group which is Wah Seong’s oil and fuel division, has purchased over 300,000 shares post-announcement of the EACOP job win.
HLIB Analysis maintained its FY22 estimates for Wah Seong however raised its FY23 earnings forecast by 15% to account for greater job win assumptions, accelerated S-curve mission billing execution from the EACOP job – which the analysis unit believes would present a bumper in each income and earnings in its second 12 months.
HLIB Analysis upgraded Wah Seong’s inventory to “purchase” (from “maintain”) with a better goal worth of RM1.17 per share (from 78 sen beforehand) primarily based on 12 occasions FY23 estimated earnings per share.