WSC to see healthier balance sheet and lower gearing level in 2018

KUCHING: Wah Seong Corporation Bhd (WSC) is expected to see a healthier balance sheet and lower gearing level next year.

In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted that WSC’s current orderbook stands at RM3.4 billion where 91 per cent of the jobs are from the oil and gas (O&G) segment, seven per cent from the renewable energy segment and two per cent from the industrial trading & services.

It added, the bulk of its orderbook from the O&G segment consists of its Nord Stream 2 (NS2) project which takes up 77 per cent while its tenderbook currently stands at approximately RM4.7 billion, with the O&G segment consisting of approximately RM3.8 billion.

“Going forward, we expect sustained earnings for WSC going forward. In addition, the management has mentioned that with the recent rise in the global crude oil price, there has been a slight pickup in projects offered for tender.

“Yet, these projects are more forward looking towards late-2018 and are only expected to material- ise in 2019 and 2020,” it opined.

Meanwhile, on WSC’s move to dispose its plantation arm (WS Agro Industries Pte Ltd), MIDF Research said, the disposal is for a total cash consideration of US$6 million and the amount is based on the approximate carrying value of WS Agro’s investments in the plantation business.

“As such, we do not expect any gain on disposal for this deal. Thus, we will be maintaining our earnings forecasts for 2018,” it opined.

Of note, WSC Group and WSC Capital has entered into a share sale agreement with Agro Panorama Sdn Bhd (APSB) for the disposal of WS Agro.

The purpose of this disposal is to streamline, realign and rationalise the business activities of the group.

The research team pointed out that for the first nine months of the financial year 2017 (9MFY17), WSC’s plantation segment has not contributed any profit yet, resulting in a cumulative RM4.1 million loss before tax.

All in, MIDF Research pegged a ‘neutral’ call on the stock.

WSC’s current orderbook stands at RM3.4 billion where 91 per cent of the jobs are from the oil and gas (O&G) segment, seven per cent from the renewable energy segment and two per cent from the industrial trading & services.