Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute has reiterated that while it is generally positive on the long-term prospects for Wah Seong Corp Bhd, but FY10 looks to be a significantly weak year and re-rating catalysts are likely to only emerge in FY11.



"Post earnings revision, we revise our fair value down to RM1.79/share (from RM1.89/share) based on an unchanged 13 times PER. We thus maintain our Underperform call on the stock," it said.



RHB Research said on Thursday, Sept 9 it recently met up with management and came away with a bleaker outlook for the rest of FY10.



Current oil and gas contract flows, especially for fabrication jobs, remain slow even though new development projects appear to be on the table.



"We thus suspect 3QFY10 earnings will again be weak and potentially similar to 2Q results," it said.



RHB Research said it trimmed its FY10-12 net profit estimates again, this time by 17.9%, 5.1% and 3.9% respectively.



"Our cuts are extensive on FY10, as we expect it to be a very weak year. Our cuts are mainly to the pipecoating/ pipe-manufacturing and engineering division's revenue. We have also eased the FY11-12 engineering division's PBT margins assumptions to 17% and 19% respectively (from 19% and 21%) as it could take more time for the division to recover.



"However we upgraded the pipe-coating division's FY10-12 PBT earnings to 19%, 20% and 21% respectively, from 18%, 19% and 20% previously as the management has guided for better margins from the Gorgon project," it said.