More job wins on the cards for Wasco

PETALING JAYA: Kenanga Research believes energy-solutions provider Wasco Bhd is on track for a strong order-book replenishment performance in the coming quarters.

Wasco had been running down its order book due to a decline in wins since a peak in the second quarter of last year (2Q24), but the research house said it believes this could be about to change.

“Specifically, we anticipate a more visible pipeline of floating production, storage and offloading-related engineering jobs that could be clinched,” the research house said.

Wasco’s order book slipped to RM2.2bil as of the end of 2Q25 from its cycle peak of RM3.7bil in 2Q24.

Kenanga Research said this had been largely due to deferments in the awarding of oil and gas contracts both locally and globally due to the weakness of crude oil prices and uncertainty caused by US tariffs.

The research house said its “market perform” rating after the 2Q25 results season was based on assumptions of weak order-book prospects for Wasco.

However, Kenanga Research said it was changing its view after visiting the company recently.

“We met with Wasco and came away more reassured of its business prospects.

“We believe that its order book might be bottoming out soon as the group is still seeing good prospects in terms of order book replenishment from its engineering segment within its oil and gas business division,” the research house added.

Kenanga Research said Wasco’s pipe coating jobs are expected to remain tepid in the near term due to the slowdown in upstream capital expenditure globally.

However, its engineering division is expected to contribute more to its order book replenishment in FY25 and FY26 as more floating production, storage and offloading jobs are expected to be awarded.

The research house maintained its FY25 earnings forecast for Wasco but raised FY26 slightly by 4% as it increased its order book replenishment assumption to RM2bil from RM1.8bil.

The research house also lifted its target price on Wasco to RM1.17 as it also raised its target price-earnings ratio (PER) for the oil and gas division from seven times to nine times.

This is consistent with its target sector average multiple due to reduced earnings risks, moving forward.

“We like Wasco for its strong position in the pipe coating market as one of the top global players and the exposure of its bioenergy division, which could rerate the group due to favourable bioenergy valuations after an initial public offering,” the research house said.

It also said it believes Wasco Greenergy possesses potential in the renewable-energy space.

“Aside from its business of building steam boilers and energy systems for palm oil planters, the group’s Greenergy business could also benefit from the increasing awareness about switching to green energy generation for plants or at least improving power-generation efficiency,” the research house pointed out.

According to independent market reports, the estimated size of the biomass boiler equipment market in Malaysia is projected to grow at a compound annual growth rate (CAGR) of 8.6% between now and 2029, double the CAGR of 3.9% between 2020 and 2024.