- We maintain our HOLD call on WCT Holdings with a fair value of RM1.38/share on an unchanged discount of 45% to its NAV. WCT announced on Bursa Malaysia that it has on 18 September, accepted a letter of award from KWASA Land Sdn Bhd.
- The award is for infrastructure works at the KWASA Damansara township development in Sg. Buloh (package WPC1A).
- The contract sum is approximately RM127mil. Its scope includes:- (i) site clearance & site preparation; (ii) earthwork; (iii) roadwork; (iv) road furniture; (v) drainage works; (vi) sewerage reticulation & sewerage treatment plant; (vii) water reticulation; (viii) park & ride facility; (ix) electrical infrastructure works; and (x) soft & hard landscape works.
- We leave our earnings forecast intact as the latest award forms part of our existing new order book assumption for FY15F.
- Year-to-date, WCT has secured total contracts worth ~RM995mil. Prior to this, the group had only secured one other job in Qatar – the Lusail Development project – worth RM868mil (based on its 70% effective stake in the WCT-Al-Ali Projects Co JV).
- The latest win helps WCT get off the mark with its first local project for FY15F. During its 2Q15 results briefing, WCT guided that its tender book as at end-June stood at RM4.7bil.
- Apart from the KWASA Damansara civil works, other notable bids include the Tun Razak Exchange, KL118, West Coast Expressway, LRT3, MRT2, Kota Kinabalu water supply scheme, Gemas-JB double tracking, hydro dams in East Malaysia and several other jobs in Qatar.
- Nevertheless, we believe that WCT needs to demonstrate stronger project delivery to warrant a stronger re-rating.
- This is more so as property presales will likely remain muted in the near term with a new sales target of RM584mil for FY15F (1H15: RM650mil).
- On the other hand, upcoming commitments for new property investments amid a weak retail/consumer outlook post-GST could further strain its cash flow.
- As at end-June, the value of ongoing internal works for its property investments at Kelana Jaya and Johor was ~RM585mil. This excludes future commitments expected for the other Paradigm Mall in OUG.
Source: AmeSecurities Research - 21 Sep 2015
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