Lower than expected. Wah Seong’s FY12 net profit was below our and consensus full-year estimates despite growing its revenue by a marginal 3.3% y-o-y. This was due to a lower intake of projects in its oil & gas segment and a product mix with a tighter margin. The dip in revenue from its oil & gas segment (-8.8% y-o-y) was offset by a 37% and 6.5% y-o-y growth in revenue in its renewable energy, and industrial trading and services segments respectively.
Declares second interim dividend. To reward shareholders, the group proposed a second interim dividend of 2.5 sen, bringing the total dividends for FY12 to 5.5 sen. On top of the cash dividend, it also proposed a special single-tier dividend by distributing its treasury shares on the basis of one treasury share for every 110 ordinary shares held.
Orderbook balloons from recent project win. The group’s current orderbook is a healthy RM1.5bn, comprising RM1.1bn worth of jobs in its oil & gas segment, RM245m in its renewable energy segment and RM172m for the industrial trading and services segment. We believe that the group could potentially secure a few oil & gas contracts this year, which may boost its orderbook further as channel checks suggest that its closest competitor, Brodero Shaw, is currently facing capacity constraints.
Maintain BUY. We retain our view that the worst is over for Wah Seong and project an earnings growth of 112.3% y-o-y, buoyed by its recent contract win and contributions from its 26.9% stake in Petra Energy. There could also be more upside to our earnings estimates if it secures more contracts this year. While our FY13 estimates are pared by 5.4%, we retain our BUY call with the FV unchanged at RM2.13 as we peg the stock to its 12-months forward earnings. We advise investors to hold on to the stock.
Source: OSK
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