PETALING JAYA: The recent share price correction in Wasco Bhd
following its weak first quarter of financial year 2026 (1Q26), offers an attractive entry point into the company's growing exposure to multiple structural growth themes, says CGS International (CGSI) Research.
While Wasco's share price fell 19% on Wednesday post-1Q26 results, the brokerage said: "We believe the sell-down may be overdone as the weakness was largely execution timing-related rather than reflective of any deterioration in the group’s longer-term fundamentals or business outlook."
The brokerage firm also expects a stronger 2H26 for Wasco, as 1Q26 softness was largely execution-timing related rather than structural.
The 1Q26 earnings were impacted by delays in the execution and progress recognition of Wasco's Middle East projects, which accounted for 15% of its RM2.6bil orderbook as of 1Q26, which affected both revenue recognition and margin progression.
According to CGSI Research, Wasco is currently trading at 5.3 times the financial year 2026 (FY26) forecasted ex-cash price-to-earnings ratio, around its historical lows, and remains one of the cheapest oil and gas stocks in its coverage.
"At these levels, we believe much of the near-term earnings headwinds are priced in while the market has yet to reflect the stronger medium-term growth outlook and strengthening balance sheet," the brokerage added.
Hence, CGSI Research has reiterated an "add" rating on the stock with a target price of RM1.75 per share.
It also continues to like Wasco for its improving earnings quality (rising clean energy contributions), good earnings visibility and growth, and expanding market presence.
The stock also offers an attractive 6%-9% forecasted dividend yield for FY26-FY28, backed by a growing net cash balance sheet.
CGSI Research noted that re-rating catalysts include conversion of Wasco's tender book into new wins, notable improvement in quarterly earnings, and margin expansion.
Downside risks include failure to replenish its orderbook, cost overruns and sustained delays in project execution.
Wasco fell 5.59%, or five sen, to 84 sen at 3.34 pm. Year-to-date, the stock has declined 3.98%.
