“We raise our FY23-24 earnings estimates by 13% and 12% respectively to reflect this new job win from Yinson,” says HLIB Research.
PETALING JAYA: Wah Seong Corp Bhd (Wasco) remains a “buy” with analysts due to the RM558mil contract clinched on Wednesday as it will provide earnings visibility and growth into financial year 2023 (FY23).
The floating production, storage and offloading (FPSO) topside modules related contract award by Yinson
Azalea Production Pte Ltd, a unit of Yinson Holdings Bhd, takes Wasco’s existing order book value to RM3.5bil. Works on the project are scheduled to be completed within 24 months.
“Assuming a rough 10% net margin for the job (engineering and fabrication jobs typically fall within this range) implies an average net earnings impact per year of roughly RM27mil,” Kenanga Research noted in a report on the oil and gas support services company.
The contract would be one of Wasco’s largest FPSO-related jobs secured to-date and the second largest single-job currently in their order book – just behind the east African crude oil pipeline project worth US$254mil (RM1.1bil) that was secured earlier in the year.It raised Wasco’s FY23 earnings by 12% to account for the stronger job replenishment and set a higher target price (TP) of 89 sen (from 80 sen previously) for Wasco.
The valuation is pegged to unchanged valuations of nine times its price to earnings multiple.
HLIB Research, meanwhile, maintained its “buy” call on Wasco with a higher TP of 96 sen a share (based on 10 times FY23 earnings per share) as it also penciled-in a 7% to 10% profit margin for the FPSO job over the 24 months duration.
“We raise our FY23-24 earnings estimates by 13% and 12% respectively to reflect this new job win from Yinson,” HLIB said in a report yesterday.
