Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: HOLD | Target Price: 2.20 |
Showing posts with label WASEONG. Show all posts
Showing posts with label WASEONG. Show all posts
August 15, 2014
November 26, 2013
WahSeong - No silver lining yet
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: HOLD | Target Price: 1.76 |
September 23, 2013
North Malay Basin job award
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.50 |
February 18, 2013
End of a dry spell
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.13 |
January 17, 2013
Wah Seong - OpportuneTimeToGoLong
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.19 |
November 27, 2012
Unfortunate jobs delay in 3Q12 - but we rather look ahead!
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.19 |
March 26, 2012
Wah Seong Corp - Turkmenistan contract in the pipeline?
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: CIMB | Price Call: BUY | Target Price: 2.35 |
Target RM2.35
Order book replenishment was the main talking point at our recent meeting with management. Up for grabs is Petronas's Turkmenistan pipe coating contract for which Wah Seong is believed to be a strong contender. Expect upside to its current order book of RM1.2bn. Our target price rises as we now value the stock at our revised CY13 target market P/E of 13x instead of 12.6x. Wah Seong remains an Outperform due to its bright order book prospects.
WASEONG - Secured substantial pipe-coating job in Turkmenistan?
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Wah Seong; Buy; RM2.05
Price Target: RM2.50; WSC MK
The Edge Weekly reported that Wah Seong is believed to have secured a contract from Petronas Carigali to coat c.90km of gas pipelines in Turkmenistan, an extension of an existing job that Wah Seong secured in Turkmenistan for Petronas' Turkmenistan Block 1 gas development project .
According to the article, Wah Seong is to coat 17km of offshore pipeline in the Diyarbakir field in the Caspian Sea and another 70km of pipelines in the Gurgany Deniz field. While there is no disclosure of the contract amount, we believe that it could be substantial, taking a cue from the previous pipe-coating contract awarded in Jul 08 which was worth RM150m to coat just 15.1km of 12'' pipeline. To recap, Petronas Carigali is the main partner developing the Block 1 project, pursuant to a production sharing contract signed in Jul 96.
Wah Seong has RM1.2bn worth of outstanding order book as at Dec11, which has been maintained throughout FY11. This positive newsflow is likely to be a strong boost to its order book. We have assumed RM450m worth of new pipe-coating order win in FY12. Therefore, we maintain our earnings forecast at this juncture. Nevertheless, we estimate that every RM100m increase in our pipe-coating order win assumption could potentially boost our FY12 earnings by 7%.
We maintain our Buy recommendation and RM2.50 TP, based on 15x FY12 EPS. We remain positive on its O&G business, premised on the increasing capex spending in Malaysia and Australia.
Source: HwangDBS Research 26 March 2012
Company Name: WAH SEONG CORPORATION BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 2.05 |
Wah Seong; Buy; RM2.05
Price Target: RM2.50; WSC MK
The Edge Weekly reported that Wah Seong is believed to have secured a contract from Petronas Carigali to coat c.90km of gas pipelines in Turkmenistan, an extension of an existing job that Wah Seong secured in Turkmenistan for Petronas' Turkmenistan Block 1 gas development project .
According to the article, Wah Seong is to coat 17km of offshore pipeline in the Diyarbakir field in the Caspian Sea and another 70km of pipelines in the Gurgany Deniz field. While there is no disclosure of the contract amount, we believe that it could be substantial, taking a cue from the previous pipe-coating contract awarded in Jul 08 which was worth RM150m to coat just 15.1km of 12'' pipeline. To recap, Petronas Carigali is the main partner developing the Block 1 project, pursuant to a production sharing contract signed in Jul 96.
Wah Seong has RM1.2bn worth of outstanding order book as at Dec11, which has been maintained throughout FY11. This positive newsflow is likely to be a strong boost to its order book. We have assumed RM450m worth of new pipe-coating order win in FY12. Therefore, we maintain our earnings forecast at this juncture. Nevertheless, we estimate that every RM100m increase in our pipe-coating order win assumption could potentially boost our FY12 earnings by 7%.
We maintain our Buy recommendation and RM2.50 TP, based on 15x FY12 EPS. We remain positive on its O&G business, premised on the increasing capex spending in Malaysia and Australia.
Source: HwangDBS Research 26 March 2012
February 23, 2012
Wah Seong Corporation: Maintain Buy - Below expectations; earnings and TP cut
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Maintain Buy with a reduced TP of RM2.60. WSC's weaker-than-expected 4Q results led us to cut 2012-13 earnings by up to 18% on lower margin assumptions. Also, while WSC will likely benefit from a strong pipeline of domestic pipe-coating projects, we reckon the majority of them will be awarded in 2H and thus recognised in 2013. Our adjusted target price incorporates the earnings revisions and is rolled forward into 2013, with a lower target PER of 13x (from 14x).
Maybank Research 23 Feb 2012
Click here for full report
Company Name: WAH SEONG CORPORATION BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 2.60 |
Maintain Buy with a reduced TP of RM2.60. WSC's weaker-than-expected 4Q results led us to cut 2012-13 earnings by up to 18% on lower margin assumptions. Also, while WSC will likely benefit from a strong pipeline of domestic pipe-coating projects, we reckon the majority of them will be awarded in 2H and thus recognised in 2013. Our adjusted target price incorporates the earnings revisions and is rolled forward into 2013, with a lower target PER of 13x (from 14x).
Maybank Research 23 Feb 2012
Click here for full report
WASEONG - Result in line
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Wah Seong Corp; Buy; RM2.00
Price Target: RM2.50; WSC MK
4Q11 earnings within expectations. Earnings visibility supported by RM1.2bn outstanding order book. 2nd
interim DPS of 3 sen declared. Maintain Buy and RM2.50 TP.
Source: HwangDBS Research 23 Feb 2012
Company Name: WAH SEONG CORPORATION BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 2.50 |
Wah Seong Corp; Buy; RM2.00
Price Target: RM2.50; WSC MK
4Q11 earnings within expectations. Earnings visibility supported by RM1.2bn outstanding order book. 2nd
interim DPS of 3 sen declared. Maintain Buy and RM2.50 TP.
Source: HwangDBS Research 23 Feb 2012
February 8, 2012
Valuation still attractive
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.48 |
Wah Seong Corporation: Maintain Hold Eyes Congo palm oil venture
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Maintain Buy with a RM3.10 target price. We reckon WSC's venture into palm oil operations in Congo is part of the Group's agenda to anchor its non-O&G operations once the O&G business spins off from the Group. While this could provide long-term growth prospects, country and operation risks are the concerns, for little is known of Congo's suitability for oil palm cultivation, its economic strength and legislation stability. That aside, we remain positive on its pipe-coating business. Our TP is based on 14x 2012 EPS.
Maybank Research 8 Feb 2012
Click here for full report
Company Name: WAH SEONG CORPORATION BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 3.10 |
Maintain Buy with a RM3.10 target price. We reckon WSC's venture into palm oil operations in Congo is part of the Group's agenda to anchor its non-O&G operations once the O&G business spins off from the Group. While this could provide long-term growth prospects, country and operation risks are the concerns, for little is known of Congo's suitability for oil palm cultivation, its economic strength and legislation stability. That aside, we remain positive on its pipe-coating business. Our TP is based on 14x 2012 EPS.
Maybank Research 8 Feb 2012
Click here for full report
Wah Seong Corp: Venturing into upstream plantation in Congo
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Wah Seong Corp; Buy; RM2.10
Price target: RM2.50; WSC MK
Venturing into upstream plantation in Congo
Wah Seong announced that it will be acquiring a 51% stake in Atama Resources Inc (ARI) in 2 stages for a total amount of US$25m (~RM75m) from 2 private companies (Silvermark Resources Inc and Giant Dragon Group Limited) registered in the British Virgin Islands.
ARI has been granted an initial 30-year oil palm plantation concession (extendable for as many terms as required by ARI) by the Government of the Republic of Congo to undertake upstream oil palm planting on 470,000 ha of federal land in Congo. Feasibility study has been completed and 180,000 ha has been identified to be developed for oil palm plantation which is estimated to take up 15 years in 10 phases with commencement in 2Q13.
Although a potential M&A to beef up Wah Seong's non-O&G earnings contribution (O&G contributed 92% earnings for 9M11) has been largely anticipated, we are slightly taken aback by this plantation acquisition given the considerable risks including geo-political risk and execution risk. We understand that the FFB yield in Congo is lower than that of Indonesia and Malaysia while CPO production cost could be 10% higher than the average of RM1,000-RM1,300/ MT in Malaysia and Indonesia.
While the estimated price of the massive land appears to be undemanding at US$104/ha relative to Indonesian green-field plantation land of US$300-400/ha, high initial capex requirement may be a concern for investors. Given this latest development, our Buy recommendation and RM2.50 TP is under review, pending an analyst briefing from Wah Seong to clarify its plantation project in Congo. Nevertheless, we remain positive on its O&G business, premised on the increasing capex spending in Malaysia and Australia.
Source: HwangDBS Equity Research: 8 Feb 2011
Company Name: WAH SEONG CORPORATION BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 2.50 |
Wah Seong Corp; Buy; RM2.10
Price target: RM2.50; WSC MK
Venturing into upstream plantation in Congo
Wah Seong announced that it will be acquiring a 51% stake in Atama Resources Inc (ARI) in 2 stages for a total amount of US$25m (~RM75m) from 2 private companies (Silvermark Resources Inc and Giant Dragon Group Limited) registered in the British Virgin Islands.
ARI has been granted an initial 30-year oil palm plantation concession (extendable for as many terms as required by ARI) by the Government of the Republic of Congo to undertake upstream oil palm planting on 470,000 ha of federal land in Congo. Feasibility study has been completed and 180,000 ha has been identified to be developed for oil palm plantation which is estimated to take up 15 years in 10 phases with commencement in 2Q13.
Although a potential M&A to beef up Wah Seong's non-O&G earnings contribution (O&G contributed 92% earnings for 9M11) has been largely anticipated, we are slightly taken aback by this plantation acquisition given the considerable risks including geo-political risk and execution risk. We understand that the FFB yield in Congo is lower than that of Indonesia and Malaysia while CPO production cost could be 10% higher than the average of RM1,000-RM1,300/ MT in Malaysia and Indonesia.
While the estimated price of the massive land appears to be undemanding at US$104/ha relative to Indonesian green-field plantation land of US$300-400/ha, high initial capex requirement may be a concern for investors. Given this latest development, our Buy recommendation and RM2.50 TP is under review, pending an analyst briefing from Wah Seong to clarify its plantation project in Congo. Nevertheless, we remain positive on its O&G business, premised on the increasing capex spending in Malaysia and Australia.
Source: HwangDBS Equity Research: 8 Feb 2011
December 7, 2011
Wah Seong price target cut, stock falls
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Wah Seong Corp, a Malaysian pipe-coating company, fell to a one-month low in Kuala Lumpur trading after HwangDBS Vickers Research Sdn Bhd cut its price target to RM2.50 after losing potential contracts in Australia.
The stock dropped 1.5 percent to RM1.96 at 9:15 a.m. local time, set for its lowest close since Oct. 3. -- Bloomberg
Company Name: WAH SEONG CORPORATION BHD
| Research House: HWANGDBS | Price Call: HOLD | Target Price: 2.50 |
Wah Seong Corp, a Malaysian pipe-coating company, fell to a one-month low in Kuala Lumpur trading after HwangDBS Vickers Research Sdn Bhd cut its price target to RM2.50 after losing potential contracts in Australia.
The stock dropped 1.5 percent to RM1.96 at 9:15 a.m. local time, set for its lowest close since Oct. 3. -- Bloomberg
November 24, 2011
RHB Research lowers Wah Seong to Underperform from Market Perform
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
KUALA LUMPUR (Nov 24): RHB Research Institute has reduced its FY12-13 revenue estimates for Wah Seong Corp Bhd by -10.2% and -10.0% respectively as it factors in lower wins going forward.
'This results in our net earnings estimates falling by 17.1% and 16.7% respectively,' it said on Thursday.
RHB Research said its new fair value estimate is RM1.49 a share based on unchanged 11 times FY12 PER.
'We are cognisant of the potential volume of domestic contracts that will be rolled-out by Petronas within the next five years but the exact timeline and the quantum of these contracts are still uncertain. Downgrade to Underperform,' it said.
The research house said that Bredero-Shaw received a letter of intent from Mitsui & Co for the pipe-coating contract, estimated to be worth US$400 million (RM1.2 billion), on the Ichthys Gas Field Development project.
'We understand that the main reason Wah Seong lost out on this project was that its plant is currently too busy to facilitate the pipe-coating schedule that was required.
'Management is confident that it will still be able replenish its contracts from the domestic pipeline replacement projects ahead. There would likely be minimal competition from Bredero-Shaw which now has its hands full with the two large Australian contracts (Wheatstone and Ichthys) won recently,' it said.
Company Name: WAH SEONG CORPORATION BHD
| Research House: RHB | Price Call: SELL | Target Price: 1.49 |
KUALA LUMPUR (Nov 24): RHB Research Institute has reduced its FY12-13 revenue estimates for Wah Seong Corp Bhd by -10.2% and -10.0% respectively as it factors in lower wins going forward.
'This results in our net earnings estimates falling by 17.1% and 16.7% respectively,' it said on Thursday.
RHB Research said its new fair value estimate is RM1.49 a share based on unchanged 11 times FY12 PER.
'We are cognisant of the potential volume of domestic contracts that will be rolled-out by Petronas within the next five years but the exact timeline and the quantum of these contracts are still uncertain. Downgrade to Underperform,' it said.
The research house said that Bredero-Shaw received a letter of intent from Mitsui & Co for the pipe-coating contract, estimated to be worth US$400 million (RM1.2 billion), on the Ichthys Gas Field Development project.
'We understand that the main reason Wah Seong lost out on this project was that its plant is currently too busy to facilitate the pipe-coating schedule that was required.
'Management is confident that it will still be able replenish its contracts from the domestic pipeline replacement projects ahead. There would likely be minimal competition from Bredero-Shaw which now has its hands full with the two large Australian contracts (Wheatstone and Ichthys) won recently,' it said.
November 16, 2011
3QFY11: Gorgon continues to shine
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: ECMLIBRA | Price Call: BUY | Target Price: 2.48 |
September 21, 2011
HwangDBS keeps 'buy' call on Wah Seong
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
HwangDBS Vickers has maintained a "buy" call on Wah Seong Corp Bhd, with a target price of RM3.10, in view of its strong earnings on the back of a RM1.3 billion order book.
The pipe-coating manufacturer's stock price traded at RM2.05, up eight sen, as at 12.30 pm.
HwangDBS Vickers said that the recent Australia Pacific Liquefied Natural Gas (LNG) contract worth RM137 million and RM85 million Kebabangan contract, will contribute positively to the second half of this year earnings and the 2012 financial year.
"Wah Seong is unlikely to be affected by the prevailing weak market, due to a pick-up in oil and gas in Malaysia and Australia", it said in a research note today, adding, the company's tender book remained healthy at RM5.2 billion.
It also said that Wah Seong Corporation Bhd is in a better shape to weather a downturn now, compared to 2008, given its strong order book to anchor earnings and a firm balance sheet with only a 15 per cent net gearing.
"It is expected to ride on the government's efforts to fast-track gas field exploration to solve the critical gas shortage," Hwang DBS Vickers added. -- Bernama
Company Name: WAH SEONG CORPORATION BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 3.10 |
HwangDBS Vickers has maintained a "buy" call on Wah Seong Corp Bhd, with a target price of RM3.10, in view of its strong earnings on the back of a RM1.3 billion order book.
The pipe-coating manufacturer's stock price traded at RM2.05, up eight sen, as at 12.30 pm.
HwangDBS Vickers said that the recent Australia Pacific Liquefied Natural Gas (LNG) contract worth RM137 million and RM85 million Kebabangan contract, will contribute positively to the second half of this year earnings and the 2012 financial year.
"Wah Seong is unlikely to be affected by the prevailing weak market, due to a pick-up in oil and gas in Malaysia and Australia", it said in a research note today, adding, the company's tender book remained healthy at RM5.2 billion.
It also said that Wah Seong Corporation Bhd is in a better shape to weather a downturn now, compared to 2008, given its strong order book to anchor earnings and a firm balance sheet with only a 15 per cent net gearing.
"It is expected to ride on the government's efforts to fast-track gas field exploration to solve the critical gas shortage," Hwang DBS Vickers added. -- Bernama
September 15, 2011
MIDF Research keeps Buy on Wah Seong Corp
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
KUALA LUMPUR: MIDF Amanah Investment Bank Bhd research is keeping its BUY recommendation for Wah Seong Corporation with an unchanged Target Price of RM2.73.
It said on Thursday, Sept 15, this is based on unchanged 15.7 times price-to-earnings for FY11, which is within its three-year historical average of 12.9 times to 24.6 times.
'We like Wah Seong Corp'' given its exposure to Australia LNG industry. On the local front, we expect recently announced gas project known as North Malay Basin, of which a new 200km pipeline to transport gas from the fields to Kerteh will be develop, to be the near-term catalyst to Wah Seong Corp,' it said.
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.73 |
KUALA LUMPUR: MIDF Amanah Investment Bank Bhd research is keeping its BUY recommendation for Wah Seong Corporation with an unchanged Target Price of RM2.73.
It said on Thursday, Sept 15, this is based on unchanged 15.7 times price-to-earnings for FY11, which is within its three-year historical average of 12.9 times to 24.6 times.
'We like Wah Seong Corp'' given its exposure to Australia LNG industry. On the local front, we expect recently announced gas project known as North Malay Basin, of which a new 200km pipeline to transport gas from the fields to Kerteh will be develop, to be the near-term catalyst to Wah Seong Corp,' it said.
September 8, 2011
Oil and gas: Still pumped up
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Oil and gas sector
Maintain positive: MIDF Research oil and gas sector aggregate earnings growth in 2QCY11 declined 8.9% quarter-on-quarter compared with 1QCY11's -2.9% q-o-q. Negative earnings surprises outweighed the positive (37% below expectation compared with 13% above expectation). Accordingly, our CY11 core aggregate profit forecast has been adjusted downwards by 4.2% mainly as a result of an earnings revision for Petronas Chemicals Group Bhd (PetChem)(-6.5%) and Bumi Armada Bhd (-12.9%). Although 2QCY11 results were a slight disappointment, sector fundamentals remain intact with estimated CY11 and CY12 earnings growth of 14.5% year-on-year and 22% y-o-y.
Petronas Gas Bhd (PetGas) continued to deliver consistent earnings in 2QCY11 despite gas supply constraints. This was attributed to its fixed charges structure and higher utilities sales. We see PetGas as a strong beneficiary from the liberalisation of the gas industry, continuous gas field development and rising natural gas demand. The upcoming LNG re-gasification plant in Melaka by mid next year and recently announced North Malay Basin gas project in the Gulf of Thailand are expected to be the next earnings drivers for PetGas.
Wah Seong Corp Bhd's earnings are expected to be sustained by its Gorgon LNG pipe-coating project. Potential pipecoating contracts for the North Malay Basin gas project and Australia LNG terminals development are also the catalysts for Wah Seong.
The gas supply shortage has affected PetChem's production and consequently its earnings growth, even though margin was still sustained on favourable product price spread. A potential global economic slowdown which might lead to slower demand growth for petrochemical products is another risk. On the bright side, a huge cash pile of about RM10 billion keeps PetChem in an excellent position to expand.
Bumi Armada's sizeable outstanding order book of RM5.8 billion is expected to support earnings growth. However, we believe that the current valuation has already factored in our earnings forecast (including the two new floating, production, storage and offloading (FPSO) contracts (Armada TGT1 and Armada Prima) secured this year, limiting the upside.
Earnings sustainability is the main concern for Malaysia Marine and Heavy Engineering Bhd (MMHE), given its slow job replenishment rate. Its order book as at June 2011 declined to RM2.9 billion from RM5.9 billion a year ago. Delay or failure in securing fabrication jobs namely for Turkmenistan B1 P2 and Malikai projects in CY12 will lead to a downward earnings revision.
The worst performer was KNM Group Bhd, whose share price was badly hit after the weaker results announcement. We do not rule out the possibility of an earnings downgrade should the financial close for its Peterborough project be delayed further. Our current 'buy' call for KNM is based on its strong order backlog of RM3.3 billion, incorporating the earnings recognition from Peterborough project starting FY12.
Our positive stance on the sector is mainly attributed to: (i) earnings growth of 14.5% y-o-y and 22% y-o-y for CY11 and CY12; and (ii) Petroliam Nasional Bhd's capital expenditure and its strategy to focus on domestic exploration and production.
Petronas has spent RM9.6 billion (+60% y-o-y) in 2QCY11. We believe higher Petronas' capex of an average RM60 billion per annum over the next five years (up from earlier announced RM50 billion to RM55 billion) will sustain job replenishment and earnings growth. Potential contracts to be awarded include the Malikai Deepwater project, North Malay Basin project and 14 sanctioned enhanced oil recovery projects. Nonetheless, from a valuation perspective, we are inclined to hold a 'neutral' view with a selective 'buy' recommendation.
Based on our stocks coverage earnings estimates, the sector 2011 price-earnings ratio and 2012 PER are pegged at 21.5 times and 17.7 times, compared with its historical average since 2008 of 18.3 times.
PetGas ('buy', target price: RM14.40) is among the top picks given its defensive business nature, consistent dividend payout with estimated 3.7% net yield and net cash position of RM1.27 per share. PetGas was also an outperformer during the previous stock market downturn. Other 'buy' recommendations include Wah Seong (TP: RM2.73) and Dialog Group Bhd (TP: RM2.94). ' MIDF Research, Sept 8
This article appeared in The Edge Financial Daily, September 9, 2011.
Company Name: WAH SEONG CORPORATION BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.73 |
Oil and gas sector
Maintain positive: MIDF Research oil and gas sector aggregate earnings growth in 2QCY11 declined 8.9% quarter-on-quarter compared with 1QCY11's -2.9% q-o-q. Negative earnings surprises outweighed the positive (37% below expectation compared with 13% above expectation). Accordingly, our CY11 core aggregate profit forecast has been adjusted downwards by 4.2% mainly as a result of an earnings revision for Petronas Chemicals Group Bhd (PetChem)(-6.5%) and Bumi Armada Bhd (-12.9%). Although 2QCY11 results were a slight disappointment, sector fundamentals remain intact with estimated CY11 and CY12 earnings growth of 14.5% year-on-year and 22% y-o-y.
Petronas Gas Bhd (PetGas) continued to deliver consistent earnings in 2QCY11 despite gas supply constraints. This was attributed to its fixed charges structure and higher utilities sales. We see PetGas as a strong beneficiary from the liberalisation of the gas industry, continuous gas field development and rising natural gas demand. The upcoming LNG re-gasification plant in Melaka by mid next year and recently announced North Malay Basin gas project in the Gulf of Thailand are expected to be the next earnings drivers for PetGas.
Wah Seong Corp Bhd's earnings are expected to be sustained by its Gorgon LNG pipe-coating project. Potential pipecoating contracts for the North Malay Basin gas project and Australia LNG terminals development are also the catalysts for Wah Seong.
The gas supply shortage has affected PetChem's production and consequently its earnings growth, even though margin was still sustained on favourable product price spread. A potential global economic slowdown which might lead to slower demand growth for petrochemical products is another risk. On the bright side, a huge cash pile of about RM10 billion keeps PetChem in an excellent position to expand.
Bumi Armada's sizeable outstanding order book of RM5.8 billion is expected to support earnings growth. However, we believe that the current valuation has already factored in our earnings forecast (including the two new floating, production, storage and offloading (FPSO) contracts (Armada TGT1 and Armada Prima) secured this year, limiting the upside.
Earnings sustainability is the main concern for Malaysia Marine and Heavy Engineering Bhd (MMHE), given its slow job replenishment rate. Its order book as at June 2011 declined to RM2.9 billion from RM5.9 billion a year ago. Delay or failure in securing fabrication jobs namely for Turkmenistan B1 P2 and Malikai projects in CY12 will lead to a downward earnings revision.
The worst performer was KNM Group Bhd, whose share price was badly hit after the weaker results announcement. We do not rule out the possibility of an earnings downgrade should the financial close for its Peterborough project be delayed further. Our current 'buy' call for KNM is based on its strong order backlog of RM3.3 billion, incorporating the earnings recognition from Peterborough project starting FY12.
Our positive stance on the sector is mainly attributed to: (i) earnings growth of 14.5% y-o-y and 22% y-o-y for CY11 and CY12; and (ii) Petroliam Nasional Bhd's capital expenditure and its strategy to focus on domestic exploration and production.
Petronas has spent RM9.6 billion (+60% y-o-y) in 2QCY11. We believe higher Petronas' capex of an average RM60 billion per annum over the next five years (up from earlier announced RM50 billion to RM55 billion) will sustain job replenishment and earnings growth. Potential contracts to be awarded include the Malikai Deepwater project, North Malay Basin project and 14 sanctioned enhanced oil recovery projects. Nonetheless, from a valuation perspective, we are inclined to hold a 'neutral' view with a selective 'buy' recommendation.
Based on our stocks coverage earnings estimates, the sector 2011 price-earnings ratio and 2012 PER are pegged at 21.5 times and 17.7 times, compared with its historical average since 2008 of 18.3 times.
PetGas ('buy', target price: RM14.40) is among the top picks given its defensive business nature, consistent dividend payout with estimated 3.7% net yield and net cash position of RM1.27 per share. PetGas was also an outperformer during the previous stock market downturn. Other 'buy' recommendations include Wah Seong (TP: RM2.73) and Dialog Group Bhd (TP: RM2.94). ' MIDF Research, Sept 8
This article appeared in The Edge Financial Daily, September 9, 2011.
August 26, 2011
2QFY11: Strong pipe coating margins
Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Company Name: WAH SEONG CORPORATION BHD
| Research House: ECMLIBRA | Price Call: BUY | Target Price: 3.06 |
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