Shares of Wah Seong Corp Bhd climbed in early trade on Friday, Jan 14 as work on the Gorgon LNG coating contract takes off.

At 9.15am, the shares rose nine sen to RM2.35 with 1.25 million shares done. Its call warrants, Wah Seong-CA added 2.5 sen to 8.5 sen.

The FBM KLCI rose 0.27 of a point to 1,571.83. Turnover was 177.81 million shares done valued at RM145.06 million. There were 231 gainers, 99 losers and 168 stocks unchanged.

ECM Libra Research said after the delays faced by the Gorgon LNG coating contract over 2HCY10, Wah Seong noted that the project is now in progress and is still slated for completion in 1QCY12 as originally planned.

Only 10% of the job has so far been completed. The Gorgon project is worth RM550 million and will yield margins of up to 20% at gross level.

“We raise our estimates for FY11 by 14.9% to account for an improvement in the engineering segment, full year contribution from Gorgon and also new jobs that may trickle in at the end of FY11,” it said.

ECM Libra Research said with orderbook growth from increased capex spend over 2011, Wah Seong should be re-rated to +1 standard deviation PE of 18x which was seen in previous rally in 2007 and 2009.

“As such, we peg its FY11 EPS to the 18x PE target to derive our revised target price of RM2.70 (previously RM2.09),” it said.