Wah Seong has secured a contract from BW Energy Gabon worth RM162m for the supply of O&G processing and compression modules. The contract is estimated to be completed within 13 months. We believe that this is a positive development for the Company as Wah Seong has secured a total of c.RM300m of contracts within the last 3 months. Nevertheless, we believe that the Company's current orderbook backlog of c.RM1.3bn is not enough for us to warrant a Buy call on the stock. Its current group orderbook cover stands at 0.9x . Maintain HOLD at unchanged TP of RM0.80 based on 0.7x FY21 BVPS.

NEWSBREAK

Wah Seong has announced that it has secured a contract from BW Energy Gabon valued at USD39.4m (RM162m) for the supply of O&G processing and compression modules for a project in Gabon. The scope of work of the contract involves complete engineering, procurement, construction and installation of O&G processing and compression modules and skid units. The scope of work is estimated to be completed within 13 months.

HLIB’s VIEW

Contract win positive for Wah Seong. We believe that the aforementioned contract win is positive for Wah Seong and this might be a potential leading indicator towards the willingness of O&G majors to award more pipeline related contracts to the market. The aforementioned contract win would bring Wah Seong’s orderbook to c.RM1.3bn.

Outlook. While we view the contract win positively, we believe that the Company would need to secure more contracts of material value to sustain its post-NS2 recovery as the estimated contract value from the Qatar North-field expansion gas project is only expected to amount to c.RM300m.

Forecast. No changes as the aforementioned contract win was in-line with our orderbook replenishment assumption.

Maintain HOLD, TP: RM0.80. We maintain our HOLD call at an unchanged TP of RM0.80 based on 0.7x (unchanged) FY21 BVPS. Wah Seong has secured a total of c.RM300m in contracts in the last 3 months, which is a positive development in our view. However, we believe that its current orderbook backlog of c.RM1.3bn is not sufficient for us to warrant a Buy call on the stock. We believe that its orderbook would need to surpass the RM1.5bn mark for us to warrant a re-rating on our call.

Source: Hong Leong Investment Bank Research - 3 Jun 2021