We came away feeling positive post the Group’s results briefing especially the potential jobs from Subang Airport regeneration project to transform the airport into becoming the preferred aerospace and business aviation hub in Asia Pacific in the next 5 years. To recap, Group FY22 profits released recently were above our expectation, largely attributed to improvement in construction and property investment & management division. Moving forward, we expect more sizable contract wins from its construction arm to replenish its order book. We estimate 87% of its current outstanding orderbook is set to be completed in FY23-24. Group’s tenderbook is estimated RM9bn and hence, we now believe its job replenishment is likely to improve and as such, we increase our orderbook replenishment by 50% to RM1.5bn for FY23-25F. All told, we raise our FY23-25F forecast upwards by 17.7% on average after adjusting our billings assumptions and to reflect higher cost of construction. We upgrade WCT to Outperform with a revised sum-of parts TP of RM0.52 (previously RM0.50) following the adjustments made to our forecast. Separately, Management proposed a final dividend of 0.5sen per share, rendering a dividend yield of 1.1%.
- Tenderbook estimated at RM9bn. After a lean few years due to pandemic, the Group is hopeful that it’s construction segment could see better days ahead with current projects tendered amounting to RM9bn. The Group has set an internal target of RM3.0bn new wins (vis-à-vis our assumption of RM1.5bn p.a.) in FY23, with a portfolio of 85% domestic and 15% foreign jobs (refer figure 2). Management has indicated their preference on infrastructure rather than building works given its proven track record in infrastructure projects and additionally, these projects provide better margins. On foreign waters, WCT plans to venture into Middle East countries for value engineering jobs and Kalimantan, Indonesia for road works.
- Subang Airport regeneration project a fresh catalyst. We understand that the Group is partaking in an advance discussion with relevant parties and working towards the presentation to Ministry of Transport along with Ministry of Finance. We believe that the bidding results could be announced by 1QFY23. To recap, the Group owns 60% stake and operates SkyPark Terminal of the Subang airport. Back in 2021, WCT proposed to regenerate Subang airport into a city airport at an initial cost of RM3.7bn over a period of 10 years.
- Property segment still challenging. The property division recorded a lower profit of 61.3% YoY in FY22 despite seeing a higher revenue of RM452m v RM317m in FY21 due to impairment of unsold completed properties, coupled with lower profit recognised from the land disposal. For FY23, Management guided approx. RM350-380m proceeds from land disposal and 4 new property launches on the pipeline (refer figure 1). Current unbilled sales stood at RM273m vs RM303m last quarter.
- Malls, hotels and airport to fare better. In FY22, property investment & management segment improved QoQ but still below pre-pandemic level. However, hints of recovery were shown as the average value of shoppers’ basket size surpassed pre-covid level, c.28% higher than 2019 level. Occupancy rate achieved >80% across all malls (BBT, PMPJ, gateway@klia, Sepang and PMJB) except Subang Skypark at 76%. Monetization of its mature investment assets could also be rerating catalyst.
Source: PublicInvest Research - 2 Mar 2023