Wah Seong’s earnings likely to decline for next one to two years
KUALA LUMPUR: Wah Seong Corporation Bhd’s ( Wah Seong) earnings have been projected to start declining for the next one to two years as there has been no significant new contract wins in recent months.
In a filing on Bursa Malaysia, Wah Seong’s net profit for the first quarter ended March 31, 2019 (1Q19) amounted to RM15.91 million, down from RM23.97 million of the corresponding period of the previous year.
Meanwhile, net profit attributable to owners of the company amounted to RM20.2 million in 1Q19, down from RM29.25 million in 1Q18.
“Given its expected dwindling order-book with no significant new contract wins in recent months, we believe earnings may have momentarily peaked, and could start to suffer a declining trend for the next one to two years,” the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said.
“We expect major new wins to be secured only in late-2019 or even 2020, backed by its tender-book at approximately RM6 billion, with project execution most likely to commence only in 2021.
“Key markets the company is tendering for include Australia and Africa, albeit with competitive margins.”
No changes were made to Kenanga Research’s numbers post-results, with the research arm’s forecasts implying earnings decline of 21 to 18 per cent for financial year 2019 to 2020 (FY1920).
Kenanga Research’s core net profit estimates for 2019E and 2020E remained at RM51.4 million and RM42.1 million, respectively.
On the other hand, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) revised down its FY19F earnings estimate by 21.7 per cent to RM80.4 million, from RM102.7 million previously, to take into account the weaker contribution from Wah Seong’s oil and gas segment.
“We have also reduced our FY20F earnings estimate by 10.6 per cent to RM110.3 million, from RM123.4 million previously, as we remain wary on its orderbook replenishment progress,” MIDF Research projected.