KUALA LUMPUR: OSK Research Sdn Bhd (OSK Research) has maintained its ‘neutral’ call for Wah Seong Corporation Bhd (Wah Seong), with the target price remaining unchanged at RM2.29 per share, based on the existing price earning ratio of 16 times financial year 2011 earnings.
“We see a brighter 2011 for this company, contributed by its Gorgon pipe coating business, better gas compressor business and consistent performance from its non-oil and gas divisions,” it said in a research note yesterday.
The Gorgon pipe coating project involves coating an 850km pipeline worth about US$162.9 million (RM551.2 million).
“We believe the gross margin would be somewhere between that for conventional and deepwater coating of 20 per cent to 30 per cent and a bulk of the job is expected to be executed this year,” it added.
Meanwhile, MIDF Research in its research note yesterday, also recommended to maintain ‘neutral’ call for Wah Seong due to the rising trend of the capital investment in oil and gas industry, expected to have a positive impact on the company’s future performance.
“We maintain our neutral call with a target price of RM2.35 per share until we hear more positive news with regards to new contract awards,” it said.
ECM Libra however, maintained its ‘buy’ call for Wah Seong with an unchanged target price at RM2.70 per share.
“The financial year 2011 will see full-year contribution from the Gorgon job which slated for completion in first quarter financial year 2012.
On top of that, we expect contract wins this year to drive earnings for next year,” ECM Libra said.
The group has a tender book of some RM5.7 billion currently, of which some 40 per cent is for pipe-coating jobs. — Bernama