Wasco Berhad has reassured investors that none of its projects have been cancelled despite operational disruptions caused by geopolitical tensions in the Middle East, with management expecting earnings to recover strongly in the second half of 2026.
According to a research report by CGS International following a meeting with management on 29 June, the disruptions primarily affected Wasco’s projects in Qatar, which accounted for about 20% of the group’s first-quarter 2026 order book and were initially expected to be the main earnings contributor during the first half of the year.
The research house said operations at the Qatar yard were temporarily halted for about three weeks in March before resuming, although project execution remains constrained by shortages of construction materials.
Management expects conditions to improve gradually from August 2026 as material supply normalises.
Outside Qatar, the remainder of Wasco’s order book continues to progress largely according to schedule, although higher logistics and supply chain costs arising from the conflict are expected to pressure margins, as not all additional costs can be passed on to customers under existing contracts.
Despite these near-term challenges, CGS International noted there have been no project cancellations.
Reflecting the slower project execution and more conservative margin assumptions, the research house lowered its earnings per share forecasts for financial years 2026 and 2027 by between 9% and 31%, while revising its target price to RM1.65 from a Gordon Growth Model valuation.
CGS International expects another weak quarter in the second quarter of 2026 before a meaningful earnings rebound from the second half of the year as execution accelerates across Wasco’s RM2.6 billion order book recorded in the first quarter.
The research house also highlighted improving enquiry levels for oil and gas infrastructure projects, driven by renewed global energy security concerns, with management anticipating stronger contract awards from its RM14 billion tender book during the second half of 2026.
CGS International believes the current earnings weakness is primarily due to execution delays rather than any deterioration in Wasco’s long-term fundamentals.
The firm reiterated its “Add” recommendation, arguing that the recent share price correction presents an attractive accumulation opportunity.
It noted that Wasco’s business has become structurally stronger, supported by an improved balance sheet and a more diversified revenue base.
Energy transition-related projects now account for 57% of the group’s first-quarter 2026 order book, up sharply from 15% at the end of 2023, reducing reliance on traditional upstream oil and gas activities while providing greater earnings visibility.
CGS International expects Wasco to benefit from long-term growth opportunities arising from energy security investments, eventual Middle East reconstruction, energy transition projects and data centre infrastructure.
The stock is currently trading at about 7.6 times forecast 2026 earnings, or 6.1 times excluding cash, while offering an estimated dividend yield of around 10%, supported by a growing net cash position.
The research house identified stronger order book replenishment and margin improvement as key re-rating catalysts, while slower contract conversion and higher-than-expected operating costs remain the main downside risks.
