Overnight, Wah Seong announced that it has secured a USD127m (~RM558m) contract from Yinson for the engineering, procurement and construction of certain FPSO topside modules. This would boost Wah Seong’s outstanding orderbook by approximately 19% to RM3.6bn (from RM3.0bn as at end-Sept 2022). With this job win, we are convinced that Wah Seong will continue to show strong and commanding growth in FY23f as the group will recognise both the RM1.1bn EACOP and this RM558m topside module EPC job win from Yinson. We are positive on this development. With that, we maintain our BUY call on with a higher TP of RM0.96/share (based on 10x FY23f EPS).

NEWSBREAK

Overnight, Wah Seong announced that it has secured a USD127m (~RM558m) contract from Yinson for the engineering, procurement and construction of certain FPSO topside modules. We gather that the work and services are to commence almost immediately with an estimated duration of about 24 months.

HLIB’s VIEW

Key highlights. We note a few key salient points, as below.  

1) This contract win came on the heels of Yinson’s announcement where it entered into an agreement for preliminary works for the Agogo FPSO with Azule Energy (the largest independent producer of oil and gas in Angola) on 5th December 2022.  

2) Azule Energy is a 50:50 independent joint venture between BP and Eni Angola SpA. We have reasons to believe that Wah Seong’s contract may be related to the Agogo FPSO.  

3) This would boost Wah Seong’s outstanding orderbook by approximately 19% to RM3.6bn (from RM3.0bn as at end-Sept 2022). With this job win, we are convinced that Wah Seong will continue to show strong and commanding growth in FY23f as the group will recognise both the RM1.1bn EACOP and this RM558m topside module EPC job win from Yinson. We are positive on this development.  

4) Based on our findings, we estimate the profit margin for this job to range from 7- 10% over the duration of 24 months.

Forecast. We raise our FY23-24f earnings estimates by 13% and 12% respectively to reflect this new job win from Yinson.

Maintain BUY, TP: RM0.96. We maintain our BUY call on Wah Seong with a higher TP of RM0.96/share (based on 10x FY23f EPS) which is at a slight premium to its 5- year average one-year forward P/E of 9.5x to reflect the positive job win prospects and earnings growth over the next 12-18 months.

Source: Hong Leong Investment Bank Research - 8 Dec 2022