Positive on Wah Seong with Nord Stream 2 plans in place

KUCHING: Analysts remain confident on Wah Seong Corporation Bhd’s  (Wah Seong) prospects this year. Following a company’s briefing, analysts at the research arm of Public Investment Bank Bhd (PublicInvest Research) were assured of the company’s project, the development of the Nord Stream 2 in Europe.

The research firm explained that Nord Stream 2 is a planned oil and gas (O&G) pipeline through the Baltic Sea, which will transport natural gas over 1,200 km from the world’s largest gas reserves in Russia via the most efficient route to consumers in Europe.

It added the project involves two parallel 48 inch lines, each starting from southwest of St Petersburg (a Russian port city on Baltic Sea) and ending at German coast, Greifswald.

After a briefing on the project’s progress, PublicInvest Research were confident of the prospects of the group, having had concerns earlier that the major project could be subject to funding issues.

The research firm gathered that the Nord Stream 2 project, as per the requirements of the contract, will be funded through project financing by the customer, in the case Nord Stream. With that, PublicInvest Research were confident that the project progress is well underway and is on track.

Wah Seong had on February 14 announced that its indirect wholly-owned subsidiary Wasco Coatings Germany GmbH (WC Germany) entered into a share purchase agreement (SPA) with Mutares AG for the acquisition of 100 per cent equity interest in Mutares Holding-16 AG (MH-16) to facilitate the Nord Stream 2 project.

Recall that Wah Seong’s unit, Wasco Coatings Europe BV had on September 6, 2016 entered into a contract with NS2 AG for the provision of concrete weight coating and storing of pipes for the Nord Stream 2 project for a contract value of approximately 600 million euros.

The research firm noted the acquisition would enable WC Germany to use the existing plant and machinery in Germany to perform its pipe coating activities for the purposes of the Nord Stream 2 project.

Additionally, PublicInvest Research noted MH-16 is the sole shareholder of Eupec Pipeline Services GmbH, a company principally engaged in the coating of pipes with typical insulating material for construction sites, the subsequent isolation of pipe welds of factory coated pipes at the construction site in Germany and abroad, as well as trading in pipeline commodities and insulating materials for construction sites.

With the uncertainty of the Nord Stream 2 project cleared, PublicInvest Research believed Wah Seong Group’s financial performance should be boosted by the higher, stable oil price levels which are expected to encourage new projects.

Therefore, the research firm opined that Wah Seong’s earnings will be supported by the group’s execution capabilities as well as the strong outstanding oderbook of RM3.6 billion as at third quarter of 2016.