Job replenishment to weigh on Wasco

PETALING JAYA: Energy solutions provider Wasco Bhd’s near-term earnings may be weighed down by softer associate contributions and slower order book replenishment, analysts say.

Hong Leong Investment Bank Research (HLIB Research) cut its earnings forecasts for Wasco for this year and next year by 9% and 9.4%, respectively, to reflect lower contributions from the energy services division, while leaving its 2027 estimates unchanged.

The research house maintained its “buy” rating on Wasco with a lower target price of RM1.49 a share from RM1.60 based on a price-earnings (PE) multiple of nine times.

It continues to like Wasco as a strategic proxy to rising capital expenditure in deepwater developments and liquefied natural gas projects, as well as emerging opportunities in the energy transition space including carbon capture, hydrogen infrastructure, and wind and solar energy.

Maybank Investment Bank Research also revised its forecasts to imply that Wasco is trading at a multiple of 6.4 times next year’s PE, which signifies decent valuations despite a softer earnings trajectory this year.

Assuming a sustained dividend payout ratio of 40%, a dividend of 5.7 sen results in a yield of 6.3%, which should provide downside support to Wasco’s share price, the research house said, adding that it believes Wasco could return to a net cash position in 2027.

The research house said it was upgrading Wasco to a “buy” with a target price of RM1 a share as value was emerging for the group.

Kenanga Research maintained its target price of RM1.17 with an “outperform” call.

It said the group’s order book improved from RM2.2bil in the second quarter of this year to RM2.6bil in third quarter.

It believes that the increase in engineering contract wins, due to increased demand from floating production storage and offloading vessels with some contracts secured during the quarter, could potentially ramp up its order book in the coming quarters.

Its upcoming listing of subsidiary Wasco Greenergy Bhd could also rerate the company as the listing multiple is likely to be above the current group valuation.