Friday, January 29, 2010

Wah Seong's market leadership a plus point

OSK RESEARCH maintained its buy call on Wah Seong (5142)at a target price of RM3.35. It likes the company's market leadership in the provision of pipe coating and corrosion protection in Asia as well as its potential in taking over from Socotherm, the number 2 world ranking.

"During our January 15 Malaysia Day in Singapore, Wah Seong updated investors on three main areas. They were:

* Its merger and acquisitions in West Africa is at an advanced stage of negotiation; * The potential acquisition of a new business to provide recurring income, and
* Its order book is still RM1.4 billion-strong," OSK wrote in a report yesterday.

"We continue to like Wah Seong for its M&A news flow as well as commanding market leadership in the pipe coating business in Asia."

Wah Seong's management has indicated that its gas compressor business has not been doing very well amid stiff competition from American competitors, given an oversupply in their markets.

"Hence, management is looking to acquire a new business, which is the supply of E&P products and services, which will fulfill its need for recurring income as earnings from the group's pipe coating contracts are mostly one-off."

"We also gather that this new business would not be bigger than its existing business," OSK said.

Click "refresh" for manual update message

CRUDE OIL LIVE 1 MIN Chart

Commodity Futures Charts