KUALA LUMPUR: CIMB Research has maintained its Add call on Wah Seong with a target price of RM2.65 and urged investors to accumulate the stock.

In a note on Friday, CIMB said with the Polarled project going without a hitch, FY14 is set to be a record year for Wah Seong. 

"We expect more exciting times in FY15-16 when annuity-like contributions from Petra and Alam JV flow through substantial," it said.

CIMB said Wah Seong has been appointed as an exclusive manufacturer and marketer for Petronas’s new coating technology, Remcoat.

"It is premature to gauge Remcoat’s impact on Wah Seong’s bottomline for now, but we think Remcoat could be the company’s third source of long-term income. We continue to value the stock at a CY16 P/E of 14.8 times, still at a 30% discount to the P/E of the oil & gas big caps. 

"The shift from project-based income to annuity-like earnings is a long-term positive and a potential re-rating catalyst that supports our Add rating," it noted.

It added that with the RM232mil North Malay Basin contract completed in 2Q14 and the bulk of the RM627mil Polarled contract now being executed in Norway, the Kuantan facility will have the capacity to meet global demand.

"Remcoat could provide Wah Seong with a steady income in the long run, thus lending more stability to the bottomline that is currently driven by lumpy pipe-coating contracts. 

"Wah Seong’s two other sources of steady income are its 26.9% stake in Petra Energy and a 49:51 JV, which owns five vessels, with Alam Maritim," it said.