Wah Seong expects to bag some key O&G projects

Company confident despite challenging outlook

“The group remains positive that a few key awards will be made this year that would contribute positively to the segment post 2020.” Chan Cheu Leong

PETALING JAYA: Despite the challenging outlook for the oil and gas (O&G) industry, Wah Seong Corp Bhd is confident that its O&G division will still be able to secure some key projects to provide specialised equipment and services to the industry this year.

According to the group’s managing director and chief executive officer (CEO) Chan Cheu Leong, the upcoming project awards are expected to boost its segment earnings in the following year.

“Last year, the market was robust with bidding and tendering activities.

“However, the results of the bids and tenders have experienced a delay, which would inevitably affect project execution,” Chan said.

“Nonetheless, the group remains positive that a few key awards will be made this year that would contribute positively to the segment post 2020,” he noted in the company’s 2019 Annual Report that was released yesterday.

Wah Seong’s O&G segment had an order backlog of Rm576.6mil as at end-2019, down from Rm774.2mil at the beginning of 2019, due to lower replenishment for order book and the smaller project awards available last year.

Wah Seong expected this year to remain challenging for its O&G division due to the postponement of projects worldwide amid the slump in global oil prices due to geopolitical tensions and weak oil demand triggered by the Covid-19 pandemic.

“Delays on project awards in final investment decision and the lack of funding remain key risks for the industry.

“Industry players remained cautious and continue to assess the outlook prior to committing to further investments,” Chan noted.

Wah Seong said the short-term impact of Covid-19 on the O&G industry as well as the Saudi Arabia and Russia trade dispute would also impact the process equipment business for its renewable energy (RE) division.

Nonetheless, it said, with a healthy order backlog already secured at the end of last year, the division should see positive growth and high utilisation rate at its facilities in 2020.

As at end-2019, its RE segment had a combined order book of Rm309.3mil, mainly driven by the process equipment business and the overseas market.

That aside, Wah Seong expected its industrial, trading and services segment to remain under pressure this year due to the general slowdown in the construction sector.

“The infrastructural housing projects would most likely be delayed due to the uncertainty shrouding the Malaysian political environment and the outbreak of Covid19,” Chan said.

“Furthermore, in periods of uncertainty, investment decisions tends to be put on hold, which would impact the sector negatively as the construction industry needs a growth catalyst driven by private demand.

“Faced with continuing uncertainties, the business outlook for 2020 will be challenging,” he added.

The division had an order backlog of Rm43.6mil at the start of 2020.

Wah Seong is expected to release its financial results for the first quarter ended March 31, 2020, tomorrow (May 20).

Last year, the company saw its net profit fall 62.8% to Rm24.1mil for the financial year ended Dec 31, 2019, from Rm64.8mil in the preceding year, while its revenue fell 15.1% to Rm2.51bil from Rm2.96bil, due to lower contribution from the O&G and industrial, trading and services segments.