- Maintain BUY on WCT Holdings with our fair value revised a tad lower to RM2.80/share (from RM2.85/share previously) on an unchanged 15% discount to its SOP value. Stripping off revaluation gains of c.RM53mil in 4Q13, WCT reported a flattish FY13 core net profit of RM145mil.

- During the quarter, WCT also prudently revised margins for some of its ongoing jobs amid a more challenging cost environment. This should put the group on a cleaner slate moving into FY14F. Construction margins were 6.2% in FY13 vs. 7.4% in FY12.

- WCT secured RM670mil worth of new contracts in 2013 on an outstanding orderbook of ~RM2.7bil as at 30 September 2013. As this was below initial expectations of over RM1bil, we expect WCT to step-up its job hunt moving into 2014. The group is reportedly bidding for RM3bil-RM5nil worth of prospective jobs – the bulk coming from Malaysia.

- Key bids include:- (i) Putrajaya Lot F (c.RM1.5bil); (ii) sections of the RM5bil West Coast Expressway; (iii) Tun Razak Exchange earthworks Zone 2 & 3 (RM200mil-RM300mil); (iv) RAPID civil works (Phase 2); and (v) MRT station works near KL Sentral.

- Furthermore, WCT remains keen to participate in the KWASA Damansara project – both as a contractor as well as a developer.

- New property sales for FY13 came in at ~RM500mil, below the targeted RM775mil. We nevertheless expect property sales to re-accelerate as part of the shortfall is due to delays in the advertising permits for two launches that would now flow through in FY14F.

- The projects are: (i) Laman Greenville (50% bookings on RM130mil sales); and (ii) Paradigm Residences (40% bookings on RM80mil sales).

- WCT is ramping up its property investment portfolio. Local press reports recently quoted management as indicating that it could set up a REIT in 2018 once its total retail Net Lettable Area (NLA) hits 5 mil sq ft.

- The Gateway@KLIA is still scheduled to open its doors by May. We understand that pre-tenancy rates are now 80%, and could reach 85% when the mall opens. Average rental rates have perked up to ~RM22psf from RM15psf initially.

- The group is also looking to establish another two malls under the Paradigm brand in Taman Yarl (near OUG) and JB. The latter could be introduced by mid-2016.

Source: AmeSecurities