Wah Seong foresees challenges, RE to emerge as the group's major profit contributor

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KUALA LUMPUR (June 4): Wah Seong Corp Bhd foresees challenges due to the dip in oil prices and volatile markets, but believes that the fundamentals of the oil and gas (O&G) industry remain intact in the long term.

In a statement today, Wah Seong group chief executive officer and managing director Chan Cheu Leong said its renewable energy (RE) division is expected to remain resilient and will emerge as a major profit contributor to the group.

He added that the group will continue to innovate, increase efficiency and implement prudent cost management activities to ride through the current operating environment.

Chan also said the group is looking into potential strategic investments and partnerships that could generate recurring earnings stream in the long term to supplement the current project-based earnings stream.

In its first quarter ended March 31, 2015 (1QFY15), Wah Seong (fundamental: 0.95; valuation: 2.6) posted a higher net profit of 28.2% of RM26.4 million from RM20.6 million a year ago.

Revenue was up 8.3% to RM522.8 million from RM482.5 million in 1QFY14.

From the results, the group showed a 3.12% rise in the RE sector from RM83.1 million in 1QFY14 to RM85.7 million in 1QFY15.

Meanwhile, its revenue in the O&G segment increased to RM268.1 million compared with RM223.4 million in 1QFY14 due to higher level of activity.

“The O&G division, under (wholly-owned subsidiary) Wasco Energy Ltd, successfully executed the North Malay Basin Project for Petronas Carigali Sdn Bhd and a substantial portion of the Polarled Project for Statoil, Norway.

“Wasco recorded revenue of RM1.4 billion (for financial year ended Dec 31, 2014) and segment profit before taxation of RM187.5 million, exceeding previous year’s performance by 92% and 361% respectively.

“The year under review was a record-breaking year for Wasco in terms of net profit attributable to owners of the company whereby for the first time it exceeded RM100 million with a contribution of RM103.5 million,” Chan said.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)