- We maintain our HOLD call on WCT Holdings with an unchanged fair value of RM1.38/share. This pegs the stock at a 45% discount to its NAV/share.

- WCT announced on Bursa Malaysia that it had on 5 October, accepted a letter of award from 1MDB Real Estate Sdn Bhd.

- The award is for the proposed earthworks under Phase 1 of the Lifestyle Quarter of the Tun Razak Exchange (TRX) mixed development project.

- The scope of works consists of earthworks, rock probing and grouting works.

- The entire contract is to be completed by November 2016. Its value is estimated at RM70mil.

- This represents WCT’s second local contract win after bagging another RM127mil earthworks contract for the KWASA Damansara township development in Sg. Buloh last month.

- For the FY to-date, WCT had secured ~RM1.1bil worth of new contracts. This is a tad higher (~6%) than our FY15F new contract assumptions of RM1bil.

- The latest wins also proves WCT’s track record in handling infrastructure works.

- Hence, we maintain our earnings and order book assumptions for WCT as the window to clinch more contracts gets narrower moving into the 4Q of 2015.

- WCT’s ongoing tender book includes potential jobs within 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.

- But, we believe that WCT needs to demonstrate stronger project delivery, particularly on the local front, to warrant a stronger re-rating.

- While the recent step-up in order book newsflow is positive, the value of local jobs secured to-date is still relatively small at a combined RM197mil.

- Moreover, the group needs to juggle between boosting its long-term recurring income via property investments and the need to rejuvenate its new construction order book.

Source: AmeSecurities Research - 6 Oct 2015