GSS Energy kept at 'buy' with 19 cents target by RHB on bright prospects

GSS’s precision engineering (PE) segment registered healthy growth despite the ongoing US-China trade war. While sales are reported in US dollars, its main and expanding Batam factory, records costs in the depreciating Indonesian rupiah.

The PE segment will also be involved in the manufacture and assembly of both gasoline and electric models in the 125cc and 150cc categories, and three-wheel tuk-tuks in South-East Asian markets, India, and Taiwan.

The segment is also in talks to secure large sized contracts on the consumer electronics front, which is likely to boost earnings from 2H19 onwards and into FY20.

“All in all, we expect its PE segment to continue to grow at 10-15% for FY19F,” says Seet.

And while the oil & gas segment has suffered many setbacks and delays throughout FY18, Seet remains optimistic that this business will likely bear fruit in 2H19F as it is likely to monetise the two gas wells it discovered in FY18.

GSS is also re-entering a few old shallow wells, and the results of these drilling will likely be known by end-1H19.

In addition, management is exploring the option of farming out part of the oil field, which will enable it to get a lump sum cash injection and also peg a value to its oil & gas assets, which are not reflected in its market cap valuation.

In the 12-month period, shares in GSS have fallen by 31% to 11 cents at 12.06pm on Friday.