- We maintain our BUY rating on WCT with an unchanged fair value of RM2.85/share – pegged at a 15% discount to its SOP value.

- WCT reported 3Q13 results which were within expectations. 9M13 earnings expanded by 18% YoY, with no dividends declared during the quarter.

- 9M13 Construction EBIT jumped by 26% YoY due to a stepup in recognition from higher-margin local projects. EBIT margins for the division rose to 11.3% against 9.5% a year ago.

- WCT’s construction margins could have been higher if not for a one-off RM26mil charge incurred in 1Q in relation to the Dukhan Highway project.

- Property EBIT rose 5% YoY on stronger progress billings although margins were lower at almost 20% from 25% in 9M12.

- Similarly, WCT’s property investment division benefited from a normalisation of Paradigm Mall’s cost structure as opposed to start-up costs incurred during its opening in May 2012. As a result, EBIT from the division rose by 21% YoY to RM22mil.

- WCT has secured around RM511mil worth of new contracts YTD. The group had previously guided for ~RM1.5bil worth of new contract replenishments for FY13F.

- While there could be some downside to its orderbook target given that 2013 is drawing to a close, we note that some of its new job prospects could flow into FY14F – where WCT’s prospects remain bright.

- More importantly, we reckon that WCT would still be primed to secure more contracts next year. Key ongoing tenders include:- (i) Putrajaya Building works (between RM500mil and RM1bil); (ii) hospital in Sabah under the PFI scheme (RM800mil) (iii) Kwasa land civil works; (iv) Certain sections of the West Coast Expressway; and (v) Phase 2 of PETRONAS’ RAPID project.

- Abroad, WCT remains hopeful of some positive news from an ongoing tender for a road job in Oman reportedly worth RM1bil.

- The much-awaited opening of the Gateway@KLIA2 by May 2014 is another positive development, signifying the group’s rising recurring income base.

Source: AmeSecurities