Investment Highlights

• We maintain our forecasts, HOLD call and FV of RM0.92 based on 10x FY19F FD EPS, in line with our benchmark forward PE of 10-12x for mid-cap construction stocks.

• WCT has been awarded by Lendlease Projects (M) Sdn Bhd a RM555mil building contract for a new shopping complex in Tun Razak Exchange (TRX).

• This is the first key construction job WCT has secured in FY18, boosting its outstanding construction orderbook to RM5.8bil (Exhibit 1). We are keeping our forecasts that assume WCT to secure RM1.2bil worth of new jobs annually in FY18-20F.

• WCT’s construction division is not spared the weakened prospects for job wins as the government cuts back on public infrastructure spending, particularly, mega projects on grounds of fiscal prudence. As local contractors compete for a shrinking pool of new construction jobs in the market, they tend to undercut each other, resulting in razor-thin margins for the successful bidders. The competition will intensify further with the introduction of a more transparent public procurement system under the new administration. Not helping either, are the prolonged downturn in the local property market and the glut in retail space that weigh down on WCT’s property development and investment divisions.

Source: AmInvest Research - 13 Jul 2018