WAH SEONG CORP BHD

Target price: RM1.57

WAH Seong’s indirect subsidiary, PT. Wasco Engineering Indonesia (PTWEI), has been awarded a US$34.5mil (RM135.2mil) contract by Basrah Gas Company, for the design, packaging and sale of gas compressor packages and associated plant and site facilities.

The contract scope involves the provision of gas compressors and process equipment such as tri-ethylene glycol (TEG) unit, fuel gas conditioning skid, pipe racks, slug catcher, knock out drum, vent stack, site facilities such as office and workshop containers, lighting, safety equipment, fire and gas detectors, power generators and air compressors.

The activities undertaken will include engineering, detail design, procurement and packaging of the above process equipment.

The contract is expected to commence in March 2018 and is to be completed by the end of 2018.

“We make no adjustment to our earnings projections as the value of this new contract is within our orderbook replenishment assumption.

“We remain concerned on the slow orderbook replenishment of Wah Seong as this contract would be its first since July 2017.

“It could reflect the risk averse stance of oil majors especially when oil prices have remained sticky,” said PublicInvest Research.

The price of oil, with Brent as the benchmark, has failed to stay above US$70 per barrel for an extended period despite the Opec and non-Opec decision to cut oil production by 1.8 million barrels a day until 2018.

Oil prices could be suppressed by rising US shale oil production which is slated to reach 11 million barrels a day by the end of 2018 where this will be higher than Russia’s.

Russia is currently the world’s biggest oil producer.