- Maintain BUY on WCT with our fair value and earnings forecast under review pending its analyst briefing later this morning. WCT reported a 1Q13 net profit of RM43mil on revenue of RM491mil. As expected, the group did not declare any dividends during the quarter under review.
- Stripping off exceptional charges of RM26mil arising from arbitration claims from the Dukhan Highway Project, core net profit would have surged 160% QoQ and 73% YoY at RM69mil or ~40% of our existing core net profit forecast.
- The construction division was hampered by two negative events in April; i.e. (i) the cancellation of the Batinah Expressway (Package 2); and (ii) RM26mil arbitration claims from the Dukhan Highway contract.
- Despite this, construction EBIT still grew by a strong 123% QoQ, thanks to a pick-up in the pace of the progress of higher-margin local projects.
- Excluding the one-off charges, core construction EBIT margins would have been higher at 18.6% in 1Q13 against 17.3% in 1Q12 (4Q12: 11.5%).
- Property EBIT surged 3.3x on the back of a 124% YoY increase in billings and 7.2%-pts YoY rise in margins to 22.6%. Notably, new sales for its 1Medini Residences in Iskandar Malaysia are fast gaining traction.
- WCT remains one of our key picks for traction to a reacceleration of contract flows post-elections.
- The group has reportedly set a RM1.5bil new job replenishment target for FY13F (ours: RM1.7bil), based on a RM5bil tender book with a 60:40 domestic/Middle East split. To date, it has secured close to RM500mil worth of new contracts.
- On the property front, WCT has lined up RM877mil worth of new launches for FY13F. They are:- (i) 1Medini high-rise condominiums (RM400mil); (ii) Retail & offices (RM180mil) and luxury homes (RM110mil) in Bandar Bukit Tinggi, Klang; (iii) apartment projects in Parklands, Klang (RM67mil); and Jelutong, Penang (RM120mil).
- We understand that pre-tenancy levels for its upcoming Gateway@KLIA2 have reached ~75% - close to the target of 80% before its opening.
Source: AmeSecurities
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