KUALA LUMPUR: Wasco Bhd is expected to keep its order book between RM3 billion and RM3.5 billion, according to RHB Research.
It expects that Wasco will prioritise projects that offer larger returns and fewer risks in its future job bids, making it more selective overall.
Wasco has a tenderbook size of RM7.3 billion and identified an addressable market size of RM13 billion. This positions Wasco for a steady outlook over the next five years, RHB said in a note.
Additionally, RHB Research anticipates further upside if Wasco is able to deliver much stronger replenishments coupled with better margins and unlock value on its existing assets.
The firm noted that it is pleasantly surprised by the potential resumption of dividend payments by the company after three years.
As such, the firm has maintained a "neutral" rating on Wasco, with a target price of RM1.55.
Meanwhile, RHB Research said that Wasco has highlighted that the pipe coating market is expected to grow to US$10.6 billion by 2027 from 2021's US$8.3 billion, representing a 6.8 per cent compound annual growth rate (CAGR).
The company has also identified significant line pipe demand from the carbon capture, utilisation, and storage (CCUS) market in Europe and Asia Pacific, with CO2 infrastructure potentially spanning 6,700–7,300 km as part of the European Union's (EU) strategy to achieve climate neutrality.
RHB Research noted that being the market leader, this provides Wasco a significant opportunity for more job wins, as evident by the existing two CCUS-related projects – Kasawari (Malaysia) and Porthos (Netherlands).
It added that other opportunities come from the hydrogen market.
Following the strong 27 per cent revenue CAGR in the past three years, Wasco also continues to see robust job opportunities – premising on the need to expedite capex spending and upgrade aging oil and gas facilities to sustain efficient production following the underinvestment between 2014 and 2022.
The group has tendered for early production facilities and sees more non-O&G job flows, including modularised data centres.
RHB Research said the capacity tightness suggests that the bargaining power has now switched back to the contractors, and Wasco is in a position to capitalise on this.
The firm noted that this is given the company's strong in-house engineering, procurement, and construction (EPC) capabilities and delivery track record.