KUALA LUMPUR (Feb 19): Hong Leong IB Research (HLIB Research) has downgraded Wah Seong Corp Bhd to “Sell” at RM1.13 with an unchanged target price of RM1.13 and said the stock has run up far ahead of the crystallisation of its tenders.

In a note today, the research house said Wah Seong reported 4Q19 results with revenue of RM429.3 million (-33% quarter-on-quarter [q-o-q], -39% year-on-year [y-o-y]) and core earnings of RM14.5 million (-2% q-o-q, +86% y-o-y); which brought FY19 core earnings of RM62.6 million (-18% y-o-y).

“At 103%/100% of house and consensus full year estimates, the results were deemed to be within expectations,” it said.

HLIB Research said the weaker q-o-q numbers were not surprising as it had expected a sequentially weaker 4Q19.

On Wah Seong’s prospects, HLIB Research said its current order book stands at RM929.6 million as of 4Q19, with oil and gas (O&G) accounting for RM576.7 million, and renewable energy accounting for RM309.3 million.

“Whilst Wah Seong’s tender book stands at circa RM5.0 billion (RM4.5 billion from O&G), it remains a strong contender to bag circa US$200 million worth of jobs in the coming months,” it said.

The research house said it was keeping its FY20-21 earnings forecast for the group intact as the results are within expectations.

“Nonetheless, we continue to expect a strong flow of orderbook replenishment in the coming months especially from fabrications and engineering.”

At 10.55am, Wah Seong shares fell 6.02% or 8 sen to RM1.25, valuing it at RM968.61 million.