WASCO has been awarded by Schneider Electric a pre-fabricated building job in Africa worth RM161.8m. We are positive on the latest contract that has boosted its YTD job wins to c.RM1b (on track to meet our full-year assumption of RM1.5b) and its outstanding order book to RM4b. We maintain our forecasts, TP of RM0.89 and UNDERPERFORM call.

WASCO has been awarded a contract by Schneider Electric France for the supply of pre-fabricated buildings for a project in Africa valued at RM161.8m. The job is expected to be completed within 17 months

We are positive on the latest contract that has boosted its YTD job wins to RM1b (on track to meet our full-year assumption of RM1.5b) and its outstanding order book to RM4b. Assuming about ~10% net margin for the job (engineering and fabrication jobs typically fall within this range) it implies an average net earnings impact per year of some ~RM11.3m.

We believe the execution risks for the job will be manageable given its past experience in fabrication-related jobs and the complexity of the job is deemed to be lesser compared to the FPSO topside module job awarded back in FY22.

Forecasts. Maintained.

We also keep our TP of RM0.89 pegged to an unchanged 9x FY24F PER, in line with the average valuation of its closest global peer Shawcor. There is no adjustment to our TP based on ESG given a 3- star rating as appraised by us (see Page 4).

Overall, our call is mainly due to: (i) cost pressures on operations due to ongoing supply chain challenges (ii) earnings growth already largely priced in by the recent strong move in its share price leading its FY24 P/E to 9.9x and (iii) geopolitical factors. Maintain UNDERPERFORM.

Risks to our call include: (i) stronger-than-expected project margins, (ii) larger-than-expected order book replenishment, and (iii) sharp uptick in crude oil prices.

Source: Kenanga Research - 25 Oct 2023