KUALA LUMPUR (June 30): CIMB Investment Bank Bhd has advised investors to accumulate shares in Wah Seong Corp Bhd, as the brokerage sees the group’s inroads in Europe and North America as potential catalysts.
In a note today, CIMB said the group could potentially secure a second contract with Statoil in Norway, worth upwards of US$100 million (RM377.35 million), following the success of the RM627 million pipe-coating contract for Statoil’s Polarled project.
“Management is looking forward to potentially securing a second contract — worth no less than US$100 million — with Statoil in Norway, where it already has an onsite, mobile plant that is handling the Polarled pipes and is aiming to further serve the North Sea market.
“The contract winner is expected to be announced in July or August 2015, before the contract commences in 2016,” said the research house.
Meanwhile, CIMB noted that Wah Seong (fundamental: 0.95; valuation: 2.60) is also bidding for potentially recurring jobs in North America, via its 49%-owned Bayou Wasco’s deepwater plant in Louisiana as its key asset.
For its operations in Malaysia, the research house said it is positive on the group’s small presence in Pengerang, as Wah Seong delivered the first shipment of spiral-welded onshore steel pipes for the RM202 million Pengerang contract, earlier this month.
It also said production has started at Wah Seong’s Sabah and Penang facilities last month, following a letter of intent received in the first quarter of this year.
“As at March 31, 2015, Wah Seong had orders worth RM1.2 billion, of which 59% came from oil & gas, 25% from renewable energy and 16% from industrial trading and services. Its tender book is worth RM5 billion, of which 80% consists of oil & gas jobs,” said CIMB.
Wah Seong was unchanged at RM1.32 at 11.40am today. Its market capitalisation was RM1.02 billion.
(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.)