Wah Seong‟s 1HFY14 results exceeded our expectations, meeting 61% and
57% of our revenue and earnings estimates. Revenue was boosted to
RM1.1bn (+31% YTD YoY, +35.1% QoQ), translating to earnings of RM60.7m
(+>100% YTD YoY, +94.5% QoQ). The exceptional results was attributed
to higher revenue achieved from the completion of the North Malay Basin
contract (worth RM232m), and c.30% progress of the Polarled Pipeline
project (worth RM611.3m). Reiterating our recommendation of Outperform on Wah Seong, our TP of RM2.60
remains unchanged, pending the approval of the Alam-PE acquisition, set
for Friday. Our TP implies an 18x PE multiple to our FY15F EPS of
14.5sen, with further upside pending the confirmation of the above said
acquisition. 2H performance will continue to be supported mainly by the
oil and gas (O&G) and renewable energy divisions, considering robust
demand of turbine and industrial boilers. A single tier first interim
dividend of 2.5 sen per ordinary share of RM0.50 was declared.
RM1.5bn orderbook. The Group‟s current orderbook has reduced to RM1.5bn from RM1.7bn, as replenishment will only occur in the next 2 quarters. The tenderbook stands at RM5.0bn, comprising RM3.5bn of O&G bids, and c.RM900m or 18% of renewable energy bids.
Finalising Alam-PE. Wah Seong‟s proposed acquisition of 49% equity interest in Alam-PE Holdings (L) Inc (Alam-PE) for a cash consideration of RM106m will be finalised this Friday. Upon completion, the acquisition will begin contributions to the Group as early as September and fully for 4QFY14. To recap, the fleet of 5 vessels of various categories (Figure 1) are currently chartered to Alam Maritim Resources Sdn Bhd (since April 2011), thus will provide immediate earnings visibility. A positive addition to the Group, Alam-PE would provide Wah Seong with a steady recurring income, coupled with a strategic partnership that would expose Wah Seong to the OSV activities.
Updates. i) Polarled Pipeline project is at c.30% progress, whereby its Norway manufacturing portion (concrete coating) began works end-July to carry on up to April/May next year. We can expect “heavier” contributions towards the tail-end of the project. ii) The Louisiana plant has secured 3 contracts worth c.USD25m with the tender value of the region to be c.USD180m. Contributions from this region will only be substantial FY15/FY16 onwards. Wah Seong will continue to bid for projects in domestic and international markets, as a reputable pipe-coating specialist, while minimising geographical and single customer exposure
Source: PublicInvest Research - 26 Aug 2014
RM1.5bn orderbook. The Group‟s current orderbook has reduced to RM1.5bn from RM1.7bn, as replenishment will only occur in the next 2 quarters. The tenderbook stands at RM5.0bn, comprising RM3.5bn of O&G bids, and c.RM900m or 18% of renewable energy bids.
Finalising Alam-PE. Wah Seong‟s proposed acquisition of 49% equity interest in Alam-PE Holdings (L) Inc (Alam-PE) for a cash consideration of RM106m will be finalised this Friday. Upon completion, the acquisition will begin contributions to the Group as early as September and fully for 4QFY14. To recap, the fleet of 5 vessels of various categories (Figure 1) are currently chartered to Alam Maritim Resources Sdn Bhd (since April 2011), thus will provide immediate earnings visibility. A positive addition to the Group, Alam-PE would provide Wah Seong with a steady recurring income, coupled with a strategic partnership that would expose Wah Seong to the OSV activities.
Updates. i) Polarled Pipeline project is at c.30% progress, whereby its Norway manufacturing portion (concrete coating) began works end-July to carry on up to April/May next year. We can expect “heavier” contributions towards the tail-end of the project. ii) The Louisiana plant has secured 3 contracts worth c.USD25m with the tender value of the region to be c.USD180m. Contributions from this region will only be substantial FY15/FY16 onwards. Wah Seong will continue to bid for projects in domestic and international markets, as a reputable pipe-coating specialist, while minimising geographical and single customer exposure
Source: PublicInvest Research - 26 Aug 2014
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