Investment Highlights

• We raise our FY17F net profit forecast by 15%, but maintain our FV of RM1.91 (which is derived by using FY18F as the base year) (Exhibit 2) and HOLD call.

• WCT's 9MFY17 core net profit of RM116.2mil beat expectations at 87% and 79% of our full-year forecast and full-year consensus estimates. We believe the key variance against our forecast came from the better-thanexpected construction margins due to write-backs of provisions.

• 9MFY17 core net profit grew 58% YoY as higher construction profits (on improved margins) more than offset lower property development earnings.

• During a recent analysts briefing, WCT maintained its guidance for >RM2bil new construction jobs in FY17F (in line with our replenishment target of RM2bil annually in FY17-19F). YTD, it has secured new jobs worth a total of RM1.69bil. It is eyeing high-rise/integrated building jobs. Also, WCT has submitted a bid for the KL-Klang bus rapid transit (BRT) project. We understand that there are five bidders for this build-operate-transfer (BOT) project valued at about RM2bil.

• WCT guided for the listing of WCT REIT in FY18. At present, it is still in the midst of sorting out certain land title issues with the authorities. To recap, WCT will bundle Paradigm Mall in Petaling Jaya (70%-owned), BBT Shopping Mall and Premiere Hotel in Klang (both whollyowned), under the REIT. WCT hopes to raise about RM400mil by paring down its stake in the REIT with an expected market value of RM1.1bil, to just under 50%.

• WCT reiterated its plan to raise about RM500mil from the disposal of landbank considered “non-strategic” in Klang Valley outskirts, such as Bandar Bukit Tinggi (Klang), Rawang and Serendah. It has resorted to "re-pricing" (price cuts of up to 10-20% for certain products) to help clear unsold property stock.

• We maintain our view that WCT will ultimately be turned into the flagship PLC of Tan Sri Desmond 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 - 23 Nov 2017