BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Tuesday, 22 May, 2012

Company Update

Company Update- Wah Seong

Julimar Contract Update
Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant WSC MK 1,514.7 Equity 757.3 2.45 1.88 0.2 40.51% Y Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Wah Seong (M) KWAP Midvest Asia S/B 2.7 -3.4% 0.5% 0.8 33.1% 5.2% 5.1%

Trading Buy

Price: RM2.00 Target Price: RM2.38 According to Upstream, Wah Price: arch rival Bredero Seongs
Shaw has secured the contract to coat 47km of 18 inch subsea pipe which worth USD45m for the Julimar Development Project which located offshore Australia. The contract will commence from 2Q13 in Bredero Shaws Kuantan plant. We are surprised with the outcome as we initially thought Bredero Shaws plant capacity in Kuantan should have been fully utilized for the Ichthys and Wheatstone contracts. We made no changes to our estimates and maintain Trading Buy call at RM2.38. Julimar Development. The field is operated by Apache which holds 65% interest while Kuwait Foreign Petroleum Exploration Company owns the rest. The project will provide raw gas from Brunello and Julimar gas fields to the Wheatstone Project. Final Investment Decision was sanctioned end of 2011. Shorter than expected. At 47km the length of pipe contracted was far shorter than the 75km than presented by Apache. As such there is a possibility that the remaining 28km pipe is still up for bidding. With this contract, Bredero Shaws plant in Kuantan should have less flexibility to takein additional jobs. Aside from the coating, the contract will involve various configurations thus the higher per kilometre contract value of close to USD1m. All eyes on orderbook. As of end of last quarter, orderbook was at RM1.2bn of which 67% was contributed from Oil and Gas segment. Year to date, the Group has yet to announce any material contract wins though it was quoted in news that it might have secured pipe coating contracts for Diyarbakir and Gurgany Deniz field both located in Caspian Sea for a total length of 87km. Even so, we recognized that there are domestic demands which are driven by replacement and re-habitation exercises for aging infrastructures though those contracts will come in a smaller packages. The completion of its 2 plants in US in rd th 3 Q and 4 Q would allow the Group to bid for jobs in new market and its ability to secure contracts will definitely alleviate some concern over its orderbook as its two main contracts, the RM85m Kebabangan project was slated for completion in 2Q12 while for the RM135m APLNG by early of 2013. No change in forecast. Pending for the release of 1 Q result, we made no changes to our earnings estimates. Valuation & Recommendation. We maintained our Trading Buy call on the counter with target price of RM2.38 based on PER of 15x on FY12 EPS of 15.8sen.
st

Share Performance (%) Absolute vs. KLCI Financial Highlights FYE 31 Dec 2009 Turnover 1,950.3 (RMm) EBIT 280.9 Pretax profit 245.8 Core Net Profit 121.3 EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Core EPS (sen) Core EPS growth PER (%) (x) DPS (sen) Div. Yield (%) NTA/share (RM) Growth ratios Turnover EBIT Pretax profit Core Net profit Share Price Chart 14.4% 12.6% -16.1% 13.7% 9.3% 0.27 16.0 29.4% 12.5 5.0 2.5% 1.20

1mth -2.4% 0.9%

3mth 1.5% 1.4%

12mth -8.4% -11.0%

2010 1,523.4 113.8 86.2 56.0 7.5% 5.7% -24.6% 6.0% 3.2% 0.25 7.4 -53.9% 27.1 4.3 2.2% 1.23

2011 1,889.1 209.5 173.3 110.4 11.1% 9.2% -24.3% 11.0% 5.7% 0.21 14.6 97.2% 13.7 6.0 3.0% 1.30

2012E 2,037.3 211.0 181.0 119.4 10.4% 8.9% -22.0% 11.1% 5.9% 0.19 15.8 8.2% 12.7 7.1 3.5% 1.41

2013E 2,283.3 230.4 202.4 133.6 10.1% 8.9% -22.0% 11.6% 6.1% 0.26 17.6 11.8% 11.3 7.9 4.0% 1.50

-16.8% 80.4% 87.5% 29.4%

-21.9% -59.5% -64.9% -53.9%

24.0% 84.1% 101.1% 97.2%

7.8% 0.7% 4.5% 8.2%

12.1% 9.2% 11.8% 11.8%

Chiong Tong Chai chiongtc@bimbsec.com.my 03-26918887 ext 175

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22 May 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Company Update: Wah Seong

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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