Wah Seong’s plan to spin off O&G asset might not materialise, says HLIB Research

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KUALA LUMPUR (March 20): Hong Leong IB Research has maintained its “Hold” rating on Wah Seong Corporation Bhd with an unchanged target price of RM1.39 and said that quarter-on-quarter, the company’s total orderbook fell from RM1.4 billion to RM1.2 billion.

In a note Friday, the research house said Wah Seong's Polared project was 60% completed with RM250 million orderbook remained to be recognised.

The whole project is expected to be completed in May 2015, it said.

“Total tenderbook size is about RM5 billion with 95% related to O&G jobs. We understand that the new contract duration is becoming shorter as clients request faster delivery which also explained difficulty in expanding orderbook size.

“Potential exercise to spin off non O&G asset to unlock value might not materialize in the near term given current market sentiment. Plantation division still in gestation period and will remain red in the next few years before breakeven.

“Maintain Hold call with unchanged target price of RM1.39 based on unchanged  9x FY16 P/E,” it said.