Wah Seong ... Apr10

Wah Seong’s wholly-owned Gas Services International Ltd (GSI) has reached a settlement with Weatherford UK Ltd. Weatherford had claimed damages as a result of GSI’s failure to deliver 28 booster compressors in time for testing and commissioning, comply with relevant standards, specification and fitness for purpose and commissioning/onsite support obligations.

Weatherford had claimed €2.4 million (RM11million) plus additional damages for the breach, which were to be offset against any amount owing to GSI, which had also filed a counter claim. In the settlement, Weatherford agreed to pay US$2 million (RM6.5million) to GSI.

Wah Seong had made some provisions for Weatherford’s claims in the past quarters. But are uncertain at this stage on the quantum of writeback of provisions arising from this settlement.

Assuming full writeback of the full US$2 million, estimate that FY10 net profit could be raised slightly by 5% under a best-case scenario.

Wah Seong’s tender book of RM5.3 billion appears huge but most awards for the tenders are likely to be announced towards year-end. As such, there is a likelihood that Wah Seong’s order book of RM1.4 billion currently could slide towards RM1 billion by 2QFY10, but rebound towards year-end (2010) as new orders materialise.

Wah Seong is still in advanced negotiations with Italy-based Orleans Group to buy a stake — around 60%-70% — in a former Socotherm pipe-coating facility in Port Harcourt, Nigeria.

But to mitigate the huge risks in Nigeria, Wah Seong is looking at a technical arrangement with the Orleans Group to provide pipe-coating consultancy services first but with an option to later buy an equity stake if the operation kicks off successfully.