Wah Seong to see improved performance in 2HFY17
KUCHING: Wah Seong Corporation Bhd ( Wah Seong) is poised to see improved financial performance in the second half of financial year 2017 (2HFY17) with the full production of the Nord Stream 2 project commencing from the fourth quarter of financial year 2017 4QFY17 onwards.
The Nord Stream 2 project, with an estimated worth of approximately 600 million euros, will be the largest income contributor to Wah Seong and is expected to support the group’s strong outstanding order book of approximately RM3.5 billion.
The project is a planned oil and gas ( O& G) pipeline through the Baltic Sea, which will transport natural gas over 1,200 km from the world’s largest gas reserves in Russia via the most efficient route to consumers in Europe.
The project involves two parallel 48 inch lines, each starting from southwest of St Petersburg (a Russian port city on Baltic Sea) and ending at German coast, Greifswald.
The research arm of Public Investment Bank Bhd ( PublicInvest Research) in a report yesterday gathered from Wah Seong that financing for Nord Stream 2 has been finalised, with the first plant in Finland to be in precommissioning and commercial production within the next two weeks.
The acquisition of an existing plant in Germany which was previously used for Nord Stream 1 is expected by 3QFY17 and is targeted to begin commercial produc- tion by August.
In the meantime, Wah Seong in a filing to Bursa Malaysia on Thursday said its indirect whollyowned subsidiary Wasco Coatings Finland (Plant and Equipment) Oy had on February 21 entered into sale and purchase agreements ( SPAs) with Finland Pipecoating Oy for various asset acquisitions.
The O& G company revealed that the 15 million euros acquisition of a plant and coating equipment were part of the terms and conditions of the NS2 project to Wah Seong Group and was completed on March 1. It added the total purchase amount and value added tax ( VAT) was received by the seller on March 1.
Moreover, Wah Seong said the SPA for the acquisition of three buildings located at Kotka, Finland, which is estimated to be 68,776 square metre in size, together with a leasehold right to the plant, and the furniture and fittings located in the plant was worth a total of nine million euros subject to the terms and conditions and SPA.
The company noted the acquisition of equipment located in the plant was for six million euros. Wah Seong observed that the plant and coating equipment were used for concrete weight coating of steel pipes from 2009 to 2010 on the Nord Stream 1 project.
It revealed that the plant production capacity or output is approximately 200 concrete weight coated pipes a day.
The plant, other assets and coating equipment will be fully utilised in the provision of pipecoating services for Nord Stream 2 over the next three years.
Post- completion of the project in 2019, PublicInvest Research gathered that Wah Seong plans to pursue other concrete weight coatings opportunities in the region.
Hence, the research firm affirmed its positive view on the prospects of Wah Seong at this juncture, valuing the company’s share price with a fair value of RM1 per share based on an estimated earnings per share of 12.5 sen pegged to eight times financial year 2017 results.