Wasco recorded core net profit after tax and minority interest (PATAMI) of RM33.3m, increased by 40.2% YoY due to higher contribution from bioenergy segment. On a QoQ basis, Wasco's core PATAMI was flattish, marginally lower by 1.1% as the accelerated sales from bioenergy segment was offset by slowdown in energy services segment. Overall, its 9MFY24 numbers exceeded our and consensus full-year estimates at 83.9% and 80.0% respectively. However, we keep our forecast unchanged as we expect further slowdown in 4QFY24 as major projects in its orderbook are reaching the tail end. In our report published on 15 November, we highlighted that the sector's valuation remains low due to potential declines in oil prices. Oil companies are likely to postpone their capital expenditures (capex) in a low-price environment, which in turn, will slow down Wasco's ability to replenish its orderbook. We maintain our Neutral call and TP of RM0.94 pegged on unchanged 6.6x PE ratio of FY25F EPS.

• Energy services segment recorded 71.5% QoQ drop in core PBT to RM13.5m. This was due to slower progress billing in the segment (-12.7% QoQ) and a 5ppts decline in margin as two major projects in its orderbook are reaching the tail end as follows: i) Yinson Agogo at 98% (2QFY24:83%), and ii) NFXP at 92% (2QFY24:82%). Another two notable projects were still progressing well: i) Schneider EACOP at 33% (2QFY24:19%) and ii) EACOP at 56% (2QFY24:45%).
• Bioenergy segment recorded 21.7% QoQ increase in PBT to RM14.1m in tandem with a 19.3% jump in revenue. During the quarter, Wasco managed to sell about 17 of turbine and 5 boilers. The segmental margin should sustained at 17%.
• Delay in securing new orderbook. In our previous note, we anticipated that Wasco would secure a substantial contract value to replenish its orderbook in 2HFY24, especially since two major projects are nearing completion. However, in 3QFY24, Wasco only secured an orderbook of RM173m and expects additional order in 1QFY25. While the current orderbook remains above RM3.0bn, the delay in securing new orders is a negative development. We believe its orderbook is unlikely to sustain at the current level as we foresee further slowdown due to oil majors are deferring its capex plans amidst low oil price environment.

Source: PublicInvest Research - 29 Nov 2024