KUALA LUMPUR (June 5): Wasco Bhd (KL:WASCO), formerly known as Wah Seong Corp Bhd, expects its earnings growth to continue in the upcoming quarters, after net profit came in at a seven-year high for the first quarter of 2024 (1QFY2024).

The pipe coating specialist’s rosy earnings outlook hinges on its RM3.2 billion order book, according to Wasco group chief executive officer and managing director Giancarlo Maccagno.

Maccagno expects the group, whose share price has climbed 47% since the beginning of this year, to deliver profitability in the “next few quarters” with the jobs on hand.

“We don't provide information on a quarter-to-quarter basis. The only indication that we give the market is to look at our order book. Wasco has got a reputation. It's got a track record over the years,” Maccagno told the media briefing during the company’s investor day on Wednesday.

Of the RM3.2 billion order book as at end-March, about RM2.9 billion is from its energy services segment and RM260.7 million from its bioenergy services segment.

Wasco is involved in pipe coating and engineering services under its mainstay energy segment. It also manufactures boilers and steam turbines for the biomass power plant that is housed under the bioenergy services segment.

Through better earnings, Maccagno said that the group may be able to resume dividend payments this year, following a hiatus after it paid a dividend of 0.4 sen per share in FY2020.

“It is too early because we know we have not paid any dividend. Subject to our board approval, we will start with something before the end of this year. Then, probably by next year or the end of this year, we should be able to announce a dividend policy,” he said.

Wasco’s net profit for the three months ended March 31, 2024 (1QFY2024) more than doubled to RM57 million from RM21.76 million a year earlier. Quarterly revenue grew 21% to RM643.94 million, compared to RM531.58 million.

The group attributed the earnings growth to higher number of projects executed, an improved project mix as well as better margins.

For the full financial year ended Dec 31, 2023 (FY2023), Wasco posted a net profit of RM108.4 million in contrast to a net loss of RM6.3 million in FY2022, while revenue increased 10.13% to RM2.61 billion from RM2.37 billion.

Analysts tracking the stock also expect the group’s earnings growth to be sustainable on the back of its healthy order book.

However, Hong Leong Investment Bank Bhd (HLIB) cautioned that Wasco has limited scope of further growth as its order book is expected to sustain at the current level in the future, according to its recent note.

Wasco has two “buy” calls and four “hold” ratings, with a consensus 12-month target price of RM1.70, according to Bloomberg data, indicating a potential 15.6% upside against its current price of RM1.47.

Following its record-high jobs on hand, Maccagno said that the company will be more selective in bidding for new jobs. Wasco is currently bidding for jobs totalling RM7.25 billion.

“I think, as long as we keep the order book between RM3 billion to RM3.5 billion, it will be more than comfortable,” Maccagno said. “Now, what we need to do is to be a bit more choosy (in tendering future projects).”

The company is currently running at about 70% to 80% capacity in the execution of ongoing projects, Maccagno said. Wasco will continue to prioritise projects that offer higher returns and lower risks, he said.

At the closing bell on Wednesday, shares of Wasco were five sen or 3.29% lower at RM1.47, valuing the company at RM1.14 billion.