KUALA LUMPUR (June 23): Wasco Bhd’s (KL:WASCO) stock rose on Monday, bucking broader market decline, as investors cheered a proposed spin-off listing of its bioenergy arm.
At least one analyst upgraded the stock, betting that a separate listing of Wasco Greenergy Bhd, which operates biomass and steam energy businesses, could boost the value of Wasco’s stock given that the unit’s closest peer BM Greentech Bhd (KL:BMGREEN) are trading at much higher valuations.
“We view this exercise positively as it unlocks value for Wasco’s shareholders,” said Kenanga Investment Bank in a note. The house raised its rating to ‘outperform’ from ‘market perform’.
Wasco, which mainly provides pipe coating to the oil and gas industry, rose as much as two sen to 97 sen benefiting from gains in the energy sector amid escalating Middle East tensions.
There are now four ‘buy’ and two ‘hold’ calls following Kenanga’s upgrade. The consensus target price has also risen to RM1.33, according to Bloomberg, which implies potential gain of up to 39% in the next 12 months from the current price.
Wasco’s stock is trading at single-digit earnings multiple. BM Greentech, which manufactures biomass boilers, is now trading at more than 20 times its trailing earnings.
A controlling 62.5% stake in Wasco Greenergy post-listing could be worth about RM313 million, or over 40% of Wasco’s current market capitalisation, according to Hong Leong Investment Bank’s estimates.
Proceeds from the initial public offering will be used to fund expansion, particularly in biomass steam power plants, as well as its operations in Indonesia, capital expenditure, digitalisation initiatives, and research and development.
“The listing is expected to enhance Greenergy’s capital position and support long-term growth,” said RHB Research. “We view the exercise as strategically sound, with successful execution and pricing key to unlocking its full value.”