RHB Research maintains ‘neutral’ call on Wasco with RM1.55 target price
KUALA LUMPUR: Wasco Bhd is expected to keep its order book at between RM3 billion and RM3.5 billion, according to RHB Investment Bank Bhd (RHB Research).
It expects Wasco to prioritise projects that offer larger returns and fewer risks.
Wasco has a tender book of RM7.3 billion and has identified an addressable market size of RM13 billion.
This positioned Wasco for a steady outlook over the next five years, said RHB Research in a note, adding that it anticipated further upside if Wasco was able to deliver stronger replenishments, coupled with better margins, and unlock value on its existing assets.
The research firm was pleasantly surprised by the potential resumption of dividend payments by the company after three years.
RHB Research has maintained a “neutral” rating on Wasco with a RM1.55 target price.
It said Wasco had also highlighted that the pipe coating market was expected to grow to US$10.6 billion by 2027 from US$8.3 billion in 2021, representing a 6.8 per cent compound annual growth rate (CAGR).
The company has also identified significant line pipe demand from the carbon capture, utilisation and storage (CCUS) market in Europe and Asia Pacific, with infrastructure potentially spanning 6,700km to 7,300km, as part of the European Union’s strategy to achieve climate neutrality.
RHB Research noted that being the market leader, this provided Wasco with a significant opportunity for more job wins, as shown by two CCUS-related projects — Kasawari (Malaysia) and Porthos (the Netherlands).
It added that other opportunities came from the hydrogen market.
Following the strong CAGR in the past three years, Wasco also continues to see robust job opportunities premising on the need to expedite capital expenditure spending and upgrade ageing oil and gas (O&G) facilities to sustain efficient production following the underinvestment between 2014 and 2022.
The group has tendered for early production facilities and sees more non-O&G job flows, including modularised data centres.
RHB Research said the capacity tightness suggested that the bargaining power had now switched back to the contractors, and Wasco was in a position to capitalise on this.