- We maintain our BUY call on WCT with an unchanged fair value of RM2.85/share, pegged at a 15% discount to its Sum-Of-Parts (SOP) value. WCT reported a 26% YoY jump in 1HFY13 net profit to RM99mil, with all divisions reporting better performances. WCT also declared an interim single-tier DPS of 3.5 sen (2QFY12: 3.8 sen), translating into a net yield of 1.5%.

- Notably, property EBIT expanded by 29% YoY to RM46mil in 1HFY13, backed by higher recognition from its 1Medini Residences project in Medini, Iskandar Malaysia.

- Earnings from its property investment division doubled to RM17mil. We believe this is largely due to the positive fullyear impact from Paradigm Mall in Kelana Jaya. Average rental rates are ~RM7psf.

- The combined contributions from its property development and investment divisions have increased from 39% in 1HFY12 to 45% of group EBIT in 1HFY13.

- With its reorganisation exercise completed, WCT is forging ahead to replenish its order book. The current tender book stands at ~ RM5bil, with a 60:40 split between local and overseas jobs.

- For the year to date, the group has clinched approximately RM511mil worth of new jobs and is reportedly targeting RM1.5bil in contract replenishments for FY13F.

- In the Middle East, WCT has submitted for tenders for RM2bil worth of contracts. This would include some RM1bil worth of tenders in Qatar.

- On the local front, new job prospects include:- (i) two hospitals in Sabah; (ii) Kwasa land civil works; (iii) phase 2 of the infrastructure works for the Petronas RAPID project in Pengerang; (iv) Putrajaya building works (Parcel F); and (v) certain sections of the West Coast Expressway.

- Similarly, we understand that WCT’s property launches may be revised upwards to over RM1bil from the initial target of RM877mil.

- This is in view of the strong take-up rates for its projects in Medini, Iskandar Malaysia. In fact, plans are afoot to bring forward the launch of the A60 land in Medini North - where demand for commercial spaces should rise as the population density within Medini grows.

- We view any recent share price weakness – in line with the broader market – as an opportunity to accumulate the stock ahead of an expected uptick in construction newsflow. WCT’s valuations are undemanding, trading at FD FY13F-15F PEs of 11x-15x vs robust EPS CAGR of 21%.

Source: AmeSecurities