PETALING JAYA: Wasco Bhd
’s re-rating catalysts include the conversion of its tender book into sizeable new job wins, margin expansion and further asset monetisation initiatives.
CGS International (CSGI) Research said based on the shift in the group’s capital expenditure (capex) timeline, it reckons the realisation of Wasco’s healthy RM10bil tender book may be delayed.
“Hence, we are pre-emptively reducing our 2025 to 2026 net profit forecasts by 9% to 19%,” it said in a note to clients.
After four years of uninterrupted growth (2021-2024), the research house now expects Wasco’s normalised net profit to dip 44% in 2025 from a record high in 2024, before returning to growth in 2026 (plus 19%) and 2027 (plus 15%), driven by a likely resumption of contract awards towards the latter part of 2025.
Earnings visibility remains strong, with Wasco’s energy services division’s revenue covered 1.2 times by a RM2.3bil order backlog, CSGI Research added.
“Our 2025 to 2026 net profit forecasts are 5% to 19% below Bloomberg consensus. As a consequence of the revisions, our target price falls to RM1.65 from RM2 previously.” At last check, Wasco was trading at 97 sen.
It said following a 40% correction in Wasco’s share price over the past 12 months, valuations now appear overly depressed.
“At 6.2 times 2025 price-to-earnings (P/E), Wasco is the cheapest within our oil and gas coverage universe, with a price-to-book value of 0.7 times, despite an above-sector average return on equity (ROE).”
It also pointed out that the stock offers a 2025 net yield of around 4.8%, based on an assumed dividend payout ratio of 30%.
“We find the historically low P/E multiples unjustified, given the company’s much stronger balance sheet, alongside improved ROEs, a stronger market position within the pipe-coating industry, and growing exposure to clean energy projects (especially via its exposure to the bioenergy segment), which deserves more attention, in our view.”
The research house identified several downside risks for Wasco, including failure to replenish its order book, cost overruns and possible margin squeezes.
It also noted that after a robust 2024, oil companies appear to adopt a wait-and-see approach to capex spending amid ongoing price volatility and demand uncertainty.
Citing data from Rystad Energy, CGSI Research said there has been a 30% reduction in offshore capex plans for 2025, compared to earlier this year.
Wasco operates across 15 countries, with business segments in pipeline services, energy and fabrication services and bioenergy services. The company reported RM164.5mil in net profit for the financial year ended Dec 31, 2024.
