• WSC’s 4Q23 normalised net profit grew 19% qoq on higher margins, driven by a greater volume of pipe-coating works during the quarter.

• FY23 normalised net profit came in ahead of our estimate by 6% and beat Bloomberg consensus forecast by 23%.

• Reiterate Add with an unchanged GGM-based TP of RM1.40.

4Q23 results review

• At the EBIT level, 4Q23 earnings grew 59% qoq and 46% yoy, driven mainly by higher margins (+4% pts qoq and yoy to 14%) as the company executed a greater volume of pipe-coating works during the quarter. At the net level, however, 4Q23 normalised earnings were up by a lesser 19% qoq and down 9% yoy due to higher taxes and minorities charge out.

• For FY23, normalised net profit grew 30% on the back of the higher revenues (+8%) from the run-down of its record order backlog during the year, coupled with a notable turnaround in associates and JV contributions (from a loss of RM22.2m in FY22 to a profit of RM14.5m in FY23) on improving activity within the O&G services space.

• Overall, FY23 normalised net profit was ahead of expectations, at 106% of our and 123% of Bloomberg consensus forecasts.

Updates from its analyst briefing today (27 Feb)

• Outstanding orderbook backlog stood at RM3.1bn as at end-4Q23, with 92% of the value stemming from its energy division and the balance 8% from bioenergy.

• Tenderbook remained at RM7bn as at Feb 2024, as there were no notable job awards during the quarter, with the bulk of projects slated to be dished out only in 2H24F, according to management.

• The company secured two smallish pipe-coating projects during the quarter – one in Malaysia and the other in UK – with a combined value of

• Wasco said it is seeing increasing demand for its bioenergy product offering and services as its customer base expands to include more industrial players vs. being largely driven by plantation companies previously, spurred by the growing focus on ESG practices.

Reiterate Add

• Despite Wasco’s relatively strong share price performance over the past 12 months (+55%), valuations remain attractive, with the stock trading at 2024F P/E of 9.4x (below its 10-year mean of 10.1x), which we find compelling for an O&G stock with encouraging growth prospects over 2024F-2025F, improving earnings visibility and rising ROEs. As such, we reiterate our Add call, with a GGM-based TP of RM1.40 (ROE: 13.9%; COE: 11%; LT g: 5%).

• Potential re-rating catalysts: conversion of its massive tenderbook into new contract wins and higher-than-expected margins. Downside risks include failure to replenish its orderbook and cost overruns for jobs on-hand.

Source: CGS-CIMB Research - 28 Feb 2024