Pick up in pipeline activities to drive Wah Seong's earnings growth

KUALA LUMPUR: Wah Seong Corp Bhd is set for earnings growth amid growing prospects in pipe-coating and services globally, says Maybank Investment research.

The research house said the market is experiencing a strong pick-up in offshore pipeline activities with about 14km of offshore pipeline awards expected over the next 24 months.

"Growth will come largely from the Asia and Australasia regions.

"Its Qatar project; Petroleum LNG’s North Field Expansion (NFE) project will be the first in WSC’s tenders to aid its replenishment programme post NordStream2 (NS2); ending 1H20," said Maybank.

Wah Seong has a 60:40 joint venture with Medgulf Construction Co for three pipe-coating facilities in Qatar to leverage on the NFE project ove rth enext few years.

"The project requires 568km of infield pipelines (16” & 38”) and 579km of trunklines (6”, 28” & 38”).

"This equates to half of NS2, in terms of length (NS2: 2.4k km) and estimated value (EUR600m) but with improved GP margin (20% vs. NS2’s 12%)," said Maybank.

It added that Wah Seong has strong tenders visibility in Australia and Europe, among others.

The research house maintained its buy call on the counter with a higher target price of RM1.50 from 94 sen previously, taking mainly into account the Qatar project.
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