Wah Seong’s orderbook grows despite 3Q loss


WAH Seong Corp Bhd’s third quarter (3Q21) earnings slumped 97.7% year-on-year (YoY) to a deficit of RM5.9 million, while revenue declined by 33% YoY and 9.8% quarter-on-quarter to RM303.8 million.

The coating oil and gas (O&G) pipes company’s cumulative nine months (9M21) showed a net profit of RM4.6 million compared to a net loss of RM329.9 million in 9M20.

MIDF Research noted that Wah Seong’s revenue for 9M21 eased slightly by 4.8% YoY to RM974.1 million.

Its orderbook remains strong at RM1.7 billion in the current quarter with some RM1.3 billion in the O&G business, RM274 million in the renewable energy segment and RM50.2 million in industrial trading and services.

“The increase in the orderbook was mostly due to the O&G segment’s contribution. However, due to government constraints following the global Covid-19 pandemic, the execution has been hampered, which the group expected to negatively influence Wah Seong financial performance in the financial year 2021 (FY21),” MIDF stated in a report on the company yesterday.

Despite the poor performance in the reporting quarter, Wah Seong’s contract wins remain its strongest points.

“Most notably are Wah Seong’s O&G processing and compression modules in Gabon, Africa, fabrication works in the UK and coating work in Qatar.

“Considering that most of its projects are scheduled to complete in FY22, the financial performance derived from these projects will not be visible until 1Q22,” it said.

MIDF reiterated these projects could take Wah Seong’s orderbook close to RM2 billion by the end of FY21.

The broker has revised Wah Seong’s earnings estimates for FY21 downward by 58% and 60% for FY22, as its 9M21 earnings did not reach MIDF expectations.

MIDF maintained its ‘Neutral’ call on Wah Seong with a revised target price of 70 sen premised on a higher price-to-earnings ratio of 36 times pegged to revised earnings per share of two sen.

MIDF warned that despite energy prices being stronger, demand for maintenance services remain unclear in the near term as there remains risk of new border restrictions from the expected resurgence of the Covid-19 pandemic and unforeseen delays in key projects.

It opined that Wah Seong will continue to fortify its orderbook until the year-end given the government’s continuous battle against the virus and the heightened preparedness for such events, coupled with the balancing energy market in the near future.