7/31/2019 BIMBSec - Wah Seong Company Update - 20120704

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BIMB SECURITIES RESEARCH

MARKET INSIGHTWednesday, 4 July, 2012

Company Update

PP16795/03/2013(031743)

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Wah Seong Trading BuyDetails Out Price: RM1.92

Target Price: RM2.28Stock Data

Bloomberg Ticker WSC MK Altman Z-score 2.5

Market Cap 1,487.8 YTD price chg -7.2%

Issued shares 757.3 YTD KLCI chg 5.0%

52-week range (H) 2.43 Beta 0.8

52-week range (L) 1.79 Major Shareholders

3-mth avg daily volume 0.4 Wah Seong (M) 32.7%

Free Float 41.53% KWAP 5.0%

Shariah Compliant Y Midvest Asia S/B 4.9%

Share Performance (%) 1mth 3mth 12mth

Absolute 4.3% -6.3% -16.9%

vs. KLCI 0.9% -6.8% -20.6%

Financial Highlights

FYE 31 Dec 2009 2010 2011 2012E 2013ETurnover 1,950.3 1,523.4 1,889.1 2,012.3 2,268.3

EBIT 280.9 113.8 209.5 204.3 226.3

Pretax profit 245.8 86.2 173.3 174.3 198.3

Core Net Profit 121.3 56.0 110.4 115.0 130.9

EBIT margin 14.4% 7.5% 11.1% 10.2% 10.0%

Pretax margin 12.6% 5.7% 9.2% 8.7% 8.7%

Effective tax rate -16.1% -24.6% -24.3% -22.0% -22.0%

ROE 13.7% 6.0% 11.0% 10.7% 11.4%

ROA 9.3% 3.2% 5.7% 5.6% 6.0%Net Gearing (x) 0.27 0.25 0.21 0.17 0.25

Core EPS (sen) 16.0 7.4 14.6 15.2 17.3

Core EPS growth 29.4% -53.9% 97.2% 4.2% 13.8%

PER (x) 12.0 26.0 13.2 12.6 11.1

DPS (sen) 5.0 4.3 6.0 6.8 7.8

Div. Yield (%) 2.6% 2.3% 3.1% 3.6% 4.1%

NTA/share (RM) 1.20 1.23 1.30 1.40 1.50

Growth ratios

Turnover -16.8% -21.9% 24.0% 6.5% 12.7%

EBIT 80.4% -59.5% 84.1% -2.5% 10.8%

Pretax profit 87.5% -64.9% 101.1% 0.6% 13.8%

Core Net profit 29.4% -53.9% 97.2% 4.2% 13.8%

Share Price Chart

Chiong Tong Chai

chiongtc@bimbsec.com.my

03-26918887 ext 175

Subsequent to its successful bid for the 26.9% stake in

Petra Energy (PE) from Perdana Petroleum (PP), Wah

Seong has announced the pricing details of the deal at

RM1.68 per share, or a 5.5% premium over PEs net asset

value. While we are positive on this deal as a way of

earnings base diversification, we are less sanguine on the

on-going USD25m Atama Resources deal, as the operating

risk is high. Overall, with its balance sheets improvement

over the last few years, we foresee no significant (if any)

credit metrics deterioration from these deals. However,

reservations over the groups further investment

requirements could create some uncertainty over the

Groups credit profile. Maintain our forecast and Trading

Buy call at target price of RM2.28.Slightly lower than previously indicated. The purchase

price of RM1.68 is slightly lower than the indicative price of

RM1.70 and represents a mild premium of 5.5% against PEs

net asset value. The total gross purchase consideration of

RM96.9m is digestible even after we factored in Wah

Seongs early investment commitment in Atama Resources

of USD25m, considering its strong liquidity level with cash

holding of about RM580m and balance sheet flexibilitywhich has strengthened over the past few years. Pending

PPs shareholders approval, the transaction is expected to

be closed in 3QFY12.

Diversified earnings base/risk. We reckon this acquisition

by Wah Seong will allow it to entrench its business within

the oil and gas value chain, considering PEs strong

exposures particularly in brownfield services segment. This

transaction may also allow Wah Seong to diversify its

earnings base and risk as most of its current oil and gas

businesses are relying heavily on one-off contract which is

susceptible to contract delay and industry contraction. As a

second largest shareholder, we expect the Group to have atleast a representative in PEs board. Nevertheless, we are

less sanguine on its USD25m investment in Atama

Resources given the high operating risk involved in

developing a greenfield plantation asset in a country that

inherited high political risk.

No change in forecast. Pending the deal, we made no

change to our numbers. For illustrative purposes, based on

street estimates, the deal could marginally boost Wah

Seongs bottomline by RM5m in FY13.

Valuation & Recommendation. We maintained our Trading

Buy call on the counter with target price of RM2.28 based

on PER of 15x on FY12 EPS of 15.2sen.

mailto:chiongtc@bimbsec.com.mymailto:chiongtc@bimbsec.com.mymailto:chiongtc@bimbsec.com.my

7/31/2019 BIMBSec - Wah Seong Company Update - 20120704

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4 July 2012 Company Update: Wah Seong

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