FY21 results above expectation
Maintain BUY and MYR1.20 TP
WSC’s FY21 results beat our FY expectation. Overall, focus is on its FY22 performance onwards (rising order backlog & tenders pipeline), with its Qatar ops poised to inspire growth, delivering similar impact as its Nordstream 2 (NS2) project in 2017. Valuations are undemanding, should WSC deliver to its expectation. Our TP is based on 10x FY22 PER (unchanged). Also, its concerted efforts to divest non-core assets, monetise and recycle its capital effectively are a positive.
4Q21: Back in the black; substantial one-offs
Excluding the one-off loss of MYR120m in 4Q21 (impairment loss on investments and share of loss of associates & JV; Evraz Wasco & Alam), WSC reported core net profit of MYR8m (vs. –MYR6m in 3Q21), which took FY21 core earnings to MYR3m (vs. FY20: -MYR64m; vs. our estimate: break-even). The QoQ strength was driven by improved renewable energy (RE)’s revenue/ PBT contributions (+44%/ +69%) due to recovery in its boiler business and equipment fabrication ops.
Rising orderbook momentum
Our earnings estimates are unchanged; incorporating MYR2b-3b job wins in FY22-24. The sub-par FY21 is well-flagged. Its longer term outlook is showing more promise (rising orderbook, ~MYR4b tender pipeline and improved cost management). Replenishment continues to show constant growth, with order backlog rising for the 6th consecutive quarter to MYR2.7b (+63 QoQ) in 4Q21, which includes EACOP’s MYR1.1b project. After EACOP, Qatar will be another key feature to WSC this FY. Securing new orders from there on a constant basis (over the next 36 months) will be a catalyst, for it will offer similar earnings impact to the NS2 project.
Qatar ops will drive optimism from FY22
The Qatar ops alone could potentially offer WSC a cumulative MYR180m net profit over 3 years (2022-24). Meanwhile, its ESG drive is a work-in-progress and should see considerable progress (disclosures, roadmap) over the next 12 months. WSC aims to be carbon neutral by 2026.