Investment Highlights

• We raise our FY17-19F forecasts by 3% each, FV by 3% as well to RM1.91 (from RM1.88) based on sum of its parts (SOP) (Exhibit 1), but maintain our HOLD call.

• WCT has been awarded by MRT Co an MRT station package (Package S204 – Kuchai Lama and Taman Niaga Emas) worth RM199.5mil. The latest job will not increase WCT's YTD job wins of RM1.05bil and its outstanding construction order book of RM5.36bil (Exhibit 2), as it forms part of an MRT viaduct package (Package V204 – from Bandar Malaysia South Portal to Kampung Muhibbah) worth RM896.4mil that WCT secured from MRT Co in Nov 2016.

• The key difference is, instead of earning an attendance fee amounting to typically 1-2% of the contract value (if the station package were to be awarded by MRT Co to a third-party contractor, also known as nominated subcontractor, and WCT's role were to be supervising the subcontractor), WCT, now as the actual contractor for the stations, will earn construction margins we believe in the high single digit.

• We therefore raise the overall margins from Package V204 to 8% from 6% previously, resulting in the above mentioned earnings upgrades. We view the latest development positively.

• We maintain our view that WCT will ultimately be turned into the flagship PLC of Tan Sri Desmond Lim (Lim), via the injection of Malton (a sister company of WCT, with its prized asset being Pavilion Bukit Jalil) and Lim’s private business ventures including Pavilion Kuala Lumpur and Pavilion Damansara Heights. This could potentially double WCT’s market capitalisation to above RM4bil.

• However, we believe it is premature to tell if the exercise will be value-enhancing to WCT’s existing shareholders, as that depends largely on the structure and pricing of the assets and new shares to be issued pursuant to the corporate exercise.

Source: AmInvest Research - 20 Sept 2017