This article first appeared in The Edge Financial Daily on August 3, 2017

Wah Seong Corp Bhd
(Aug 2, 97 sen)
Maintain outperform with a target price (TP) of RM1.05: Wah Seong Corp Bhd’s indirect subsidiary, PT Wasco Engineering Indonesia, has been awarded a US$24.2 million (RM103.82 million) contract by Siemens SAS, for the design and build-up of three substations including heating, ventilation and air-conditioning for a project in Kazakhstan.

The contract is expected to commence in the third quarter of financial year 2017 (3QFY17) and to be completed by Oct 30, 2018. We are pleased with this announcement as it contributes to our contract replenishment assumption and thus continues to support our “outperform” view with a TP of RM1.05 pegged at eight times FY18 earnings per share of 13.2 sen. The contract is for the provision of engineering, design, supply and fabrication services, which are within the group’s capabilities.

The work scope involves 3D modelling, structural analysis and design, blast wall design and design of all ancillary systems such as lighting, safety, fire and gas detection. It also includes the provision of all necessary manufacturing drawings and full procurement of all items within its design scope and subsequently the responsibility for all aspects of the construction phase including installation and integration of all of the free issue equipment.

Wah Seong has limited downside as the group’s performance should be boosted by the higher, stable oil price level, which is expected to encourage new projects, coupled with its execution capabilities supported by its order book of around RM3.8 billion as at 1QFY17. — PublicInvest Research, Aug 2