Wasco Bhd (Wasco) has been awarded by Schneider Electric a pre-fabricated building job in Africa worth RM161.8 million, and this could boost its YTD job wins to RM1b.
In its Company Update, Kenanga Research (Kenanga) is positive that the latest contract has boosted Wasco’s YTD job wins to RM1 billion cumulatively.
“This makes it on track to meet our full-year assumption of RM1.5b and its outstanding order book to RM4b, assuming about around 10% net margin typical for engineering and fabrication jobs.”
Kenanga said that WASCO has been awarded a contract by Schneider Electric France for the supply of pre-fabricated buildings for a project in Africa valued at RM161.8 million, expected to be completed within 17 months.
“We are positive on the latest contract that has boosted its YTD job wins to RM1b (on track to meet our full-year assumption of RM1.5b) and its outstanding order book to RM4b.
“Assuming about ~10% net margin, it implies an average net earnings impact per year of some ~RM11.3m. We believe the execution risks for the job will be manageable given its past experience in fabrication-related jobs and the complexity of the job is deemed to be lesser compared to the FPSO topside module job awarded back in FY22,” it said.
However, Kenanga maintains its UNDERPERFORM call and its forecast with TP of RM0.89 pegged to an unchanged 9x FY24F PER, in line with the average valuation of its closest global peer Shawcor.
It added that no adjustment to its TP based on ESG given a 3- star rating as appraised by the research house.
“Overall, our call is mainly due to cost pressures on operations due to ongoing supply chain challenges, earnings growth already largely priced in by the recent strong move in its share price leading its FY24 P/E to 9.9x and geopolitical factors,” it said.
Kenanga said the risks to its call include stronger-than-expected project margins, larger-than-expected order book replenishment, and sharp uptick in crude oil prices.
