Wasco reported core net profit after tax and minority interest (PATAMI) of RM21.4m, higher by 56.5% QoQ. This is attributed to higher progress billings on key projects, which recorded higher revenue by 15.8% QoQ. On YoY basis, core PATAMI is lower by RM1m however, due to higher effective tax rate at 27.3% as compared to 9.8%. Cumulatively, Wasco recorded core PATAMI of RM49.1m for 9MFY23, higher by 39% YoY. This is in-line with our and consensus numbers at 73.4% and 70% of full year estimates. Amongst all segments, Bionergy recorded significant growth at +41.2% YoY to RM34.2m of profit before tax (PBT). The Energy segment remains the main contributor to its overall bottomline, though recording flattish PBT at RM126.6m (+1.2% YoY). Wasco’s tenderbook remains at a historical-high of RM7.0bn, with orderbook slightly lower at RM3.6bn amid slower replenishment for the quarter. Although Wasco recorded a solid performance, margins have yet to improve from low single digits due to higher minority interest participation by its local partners in the Energy segment’s overseas projects. We maintain our Neutral call and TP of RM1.00, pegged on 11x multiple of FY24 EPS.

• The Bioenergy segment, primarily providing services related to biomass energy generations, including boilers, steam turbine and complete system. The segment is part of its core business to grow significantly, echoing the National Energy Transition Roadmap (NETR) agenda with targeted biomass and biogas power generation capacity of 1.4GW by 2050. For 9MFY23, the segment recorded RM210.4m of revenue, +16.3% YoY. This translates into 10% of total Wasco’s revenue, with management guiding that the ratio will remain the same for FY2024 as it continues to grow the overall business. The segment also commands higher margins, around mid-double digits as compared to its Energy segment with low single digits.

• Project updates. Wasco highlighted that current performance is mainly driven by Energy segment with the progress of three key projects: i) East African Crude Oil Pipeline (EACOP) at 37%, ii) Yinson Agogo FPSO at 31% and iii) North Field Expansion Project (NFXP) at 27%.

• Eyeing Carbon Capture Storage (CCS) projects. Wasco secured two projects: i) RM162m supply of pre-fabricated buildings from Schneider Electric France and ii) RM63m of first pipe coating services for Porthos CCS project for Nederlandse Gasuine (NG). The CCS project would be a showcase for Wasco to secure more related projects worth about RM4.6bn in the next three to five years. Wasco could also be frontrunner for some of the projects given its local presence as the sole pipe-coater in respective CCS markets.

Source: PublicInvest Research - 29 Nov 2023