WASEONG announced a contract award from Yinson for a FPSO topside module worth roughly USD127 million. Hence, Kenanga Research has expressed its optimism on this award which would be one of its largest FPSO-related jobs secured to-date, and would be the second largest job currently in their order book, which is estimated to be boosted to around RM3.5 billion post contract win.
Secured topside module contract from YINSON. WASEONG announced that it has been awarded a contract by YINSON for the supply of certain FPSO topside modules valued at ~USD127m (or ~RM558m). Scope of works involves engineering, procurement and construction of FPSO topside modules, and is expected to be completed with 24 months.
Kenanga Research’s take on the project win:-
*Positive on the contract win. The research house were positively surprised on the contract win. This would be one of WASEONG’s largest FPSO-related jobs secured to-date, and would be the second largest single-job currently in their order book – just behind the EACOP project worth USD254m secured earlier in the year. Post contract win, this would bring the group’s current order book to a total of around RM3.5b. This would also mean its order book will be the highest it has ever been since 2016 when they secured the Nord Stream 2 contract.
*Financial impact. Assuming a roughly around 10% net margin for the job (engineering and fabrication jobs typically falls within this range) implies an average net earnings impact per year of roughly around RM27m.
Forecasts. Post contract award, the research house has hence raised its forecast earnings for next year (FY23F) by 12% to account for the stronger job replenishment.
The research house has maintain OUTPERFORM rating on this counter, with a higher target price (TP) of RM0.89 (from RM0.80 previously) – pegged to unchanged valuations of 9x PER – in line with the average valuation of its closest global peer Shawcor.
Overall, Kenanga Research likes the name for the reasons like being a beneficiary of the resurgence of global oil and gas development spending; commanding the second largest market share in the global pipe coating space and operating in a virtual duopoly; certainty of its return to profitability given its current strong order book at a multi-year high.
Risks identified include project execution risks; slower-than-expected order book replenishment; unexpected escalation in project costs; and geopolitical and ESG factors surrounding projects that the group is involved in.
