INVESTMENT HIGHLIGHTS

• Wah Seong Corp’s (WSC) indirect unit was awarded with a contract by Basrah Gas Company valued at USD34.6m (equivalent to RM135.2m)

• The contract is for the design, packaging and sale of gas compressor packages and associated plant and site facilities

• The project is expected to commence in March 2018 and to be completed by end-2018

• This will increase the orderbook for WSC to RM2.94b

• Maintain NEUTRAL with unchanged TP of RM1.58

WEIL awarded contract by Basrah Gas Company. The contract between WSC’s indirect wholly-owned subsidiary, Wasco Engineering International Ltd (WEIL) and Basrah Gas Company is valued at USD34.6m (equivalent to RM135.2m, based on the exchange rate of RM3.9135). The contract is for the design, packaging and sale of gas compressor packages and associated plant and site facilities.

Scope of work. The contract involves the provision of gas compressors and process equipment such as tri-ethylene glycol (TEG) unit, fuel gas conditioning skid, pipe racks, slug catcher, knock out drum, vent stack, site facilities such as office and workshop containers, lighting, safety equipment, fire and gas detectors, power generators and air compressors. The engineering, detail design, procurement and packaging of the aforementioned process equipment is also included in the contract.

Timeline. The project is expected to commence in March 2018 and to be completed by end-2018.

Increased orderbook. With the inclusion of this project, the group’s orderbook stands at RM2.94b (previously RM2.8b).

Impact on earnings. No changes made to earnings estimates as the project value is within our normal orderbook replenishment target for the group. Assuming a typical 10-12% pretax margin for such engineering works, this project could contribute approximately RM13- 16m to the group during the project duration.

Maintain NEUTRAL. We maintain our NEUTRAL call on Wah Seong with an unchanged TP of RM1.58 per share. Our TP is based on a EPS19 of 15.8sen pegged to an unchanged forward PER19 of 10x.

Source: MIDF Research - 19 Mar 2018