PETALING JAYA: Wasco Bhd
(previously known as Wah Seong Corp) is expected to chart strong earnings growth as it rides the opportunities arising from the global energy transition.
RHB Research, which initiated coverage on the international oil and gas and industrial services provider, said the group’s order book as of the third quarter of 2023 stood at RM3.6bil, of which RM3.3bil or 92% is related to energy services, followed by bioenergy services at 8%.
Wasco’s tender book is worth about RM7bil with the bulk accounted for by the oil and gas unit with jobs from the Middle East, Australia, Africa and Malaysia.
“Wasco targets to continue its strong replenishment rate in the second half of 2024. Hence, we believe it will be able to maintain its order book value at more than RM3bil by end-2024,” the research house said in a report yesterday,
Moreover, RHB Research projects Wasco’s energy transition-related jobs will increase in the coming years.
These jobs currently account for only 6% of its existing RM3.3bil outstanding energy services order book.
“It also secured its maiden line pipe coatings contract for a carbon capture and storage (CSS) project worth US$13mil at the Port of Rotterdam for Nederlandse Gasunie.
According to management, there are approximately 5,000km of pipelines for CCS projects planned between 2024 and 2027, translating to an estimated US$1bil worth of potential pipe-coating job opportunities, including domestic work,” the research house said.
Wasco’s bioenergy arm is expected to provide a growing, yet stable and recurring earnings stream due to more new turbine installations enlarging its operations and maintenance customer base.
“Long-term growth will be further anchored by the National Energy Transition Roadmap rolled out last year. Malaysia targets to increase its bio-refinery capacity to 3.5 billion litres and raise biomass and biogas power generation to 1.4 gigawatt by 2050,” the research house said.
RHB Research has a “buy” call for Wasco with a target price of RM1.43 and expects the group to post 4%-40% year-on-year earnings growth from the financial year 2023 (FY23) to FY25.
