- We maintain our BUY call on WCT with an unchanged fair value of RM2.65/share – pegged at a discount of 15% to its revised sum-of-parts (SOP) value.

- WCT reported a 25% QoQ decline in its 3Q14 net profit at RM26mil. The main drag came from lower construction and property margins, which fell by 3ppts and 5.6ppts respectively. In addition, there was also additional cost incurred to complete the New Doha International Airport project in Qatar.

- On a 9M basis, earnings were relatively flat at RM100mil or c.64% of our FY14F estimates.

- Nevertheless, we maintain our FY14F net profit forecast of RM157mil as we expect some pick up in sequential billings in 4Q as some of its newer jobs pick-up progress.

- Positively, WCT’s orderbook momentum appears to be gaining traction. Late last month, the group secured a RM652mil contract to build the IKEA Cochrane Mall for Ikano Ltd. The IKEA contract lifts WCT’s new job wins to almost RM1bil.

- More importantly, WCT is stepping up its orderbook replenishment initiatives. The group’s active tender bid is ~RM4bil, with roughly an even split between domestic and Middle Eastern jobs.

- Key local bids include sub-contracting packages for the West Coast Expressway (WCE). Other key bids include the KWASA Damansara civil works as well as additional works from the RAPID Pengerang and Tun Razak Exchange (TRX) projects.

- More prospects could follow suit following a slew of new infrastructure projects announced under Budget 2015, including the highly anticipated RM23bil Klang Valley MRT2 line.

- On the property front, WCT has moved to increase its landbank following the purchase of c.221 acres of land in Serendah, Selangor for RM115mil. New Sales achieved for 9M14 was almost RM500mil vs. the group’s full-year target of RM617mil (unbilled sales: RM589mil).

- WCT is currently trading at undemanding FD FY15F-17F Pes of 9x-14x vs EPS CAGR of 9%. The group’s share buy-back activities provides further valuation support in the near-term (25 mil shares at c.RM2.16/share or ~2.3% of share capital).

Source: AmeSecurities