Business

Wednesday August 5, 2009

Wah Seong to wholly own pipe-coating firm


Analysts say this will generate higher profit contribution to group

PETALING JAYA: Wah Seong Corp Bhd plans to acquire the remaining 32.52% of PPSC Industrial Holdings Sdn Bhd it does not already own for 15.5 million euros (RM76.2mil) from Italian company Socotherm S.P.A.

The purchase will make PPSC a wholly-owned unit of Wah Seong.

The company told Bursa Malaysia yesterday the proposed acquisition would “remove a significant portion of the dilutive effect of minority interests in Wah Seong’s pipe-coating business”.

“It will also allow the pipe-coating business to expand geographically without any restriction from minority shareholders,” it said.

OSK Research said in a report that the acquistion would have minimal contribution to Wah Seong’s net profit for the current financial year ending Dec 31 but a full-year contribution could be expected in the next financial year.

“We believe it will generate a higher profit contribution based on the higher gross margin of 30% to 40% from deepwater pipe coating compared with conventional pipe coating of about 20%.

“Currently, PPSC is busy coating deepwater pipes for Petronas Gemusut Kakap and Turkmenistan projects,” it said in a report.

OSK said the move was also timely for Wah Seong, given that it had been shortlisted and awaiting the award of pipe-coating jobs in Gorgon (Australia) and Papua New Guinea.

“Furthermore, we believe there will be more projects for deepwater pipe coating since oil price has stablised at US$60 and has now touched above US$70 per barrel,” it said.

It noted that Wah Seong was looking into the acquisition of pipe-coating companies in Nigeria and Angola.


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