OSK Research maintains Buy on Wah Seong, target price RM3.24

KUALA LUMPUR: OSK Investment Research is maintaining a Buy on Wah Seong Corp Bhd with an unchanged target price of RM3.24 based on a price-to-earnings ratio (PER) of 14 times FY10 earnings per share (EPS).

For 4QFY09, the research house envisages an even stronger quarter as there would be no minority interest erosion from PPSC Industrial Holdings Sdn Bhd in which Wah Seong completed the acquisition of the remaining 32% on 29 Oct, 2009.

"We continue to like the company for its market leadership in the provision of pipe coating and corrosion protection in Asia," it said.

Wah Seong posted net profit of RM31.02 million in the third quarter ended Sept 30, 2009, up 14.7% from RM27.04 million a year ago, as the bottomline was boosted by its specialised pipe coating and corrosion protection services.

OSK Research said the two major events expected to unfold before year-end are the outcome of bidding for the USD160m Gorgon pipe coating job, and its M&A in West Africa?s Nigeria and Angola.

To recap, Wah Seong together with Bredero Shaw have been shortlisted to bid for the Gorgon 900km pipeline job but we believe Wah Seong stands a great chance of winning given its strong presence in the Asian markets.

Wah Seong is also looking at acquiring the assets of pipe coating companies - one each in Nigeria and Angola - that are jointly owned (60:40) by Socotherm and a strategic partner.

"We understand that the strategic partner is currently in negotiations with Socotherm to take over the latter's 60% stake and on completion, Wah Seong will buy over the assets of these two pipe coating companies," it said.