• We maintain our BUY rating on WCT Holdings with our fair value raised slightly to RM1.54/share (previous: RM1.52/share), based on an unchanged 40% discount to its revised NAV of RM2.54/share.
• The increase in our fair value is to account for another contract that WCT has successfully secured from the PETRONAS group in Johor. · WCT announced on Bursa Malaysia yesterday evening that it had received a letter of award from PRPC Utilities and Facilities Sdn Bhd for the Utilities, Interconnecting and Offsite (UIO) facilities under PETRONAS' RAPID project in Pengerang, Johor.
• This is the second such UIO package that WCT has won within a month.
• The current package requires WCT to deliver Engineering, Procurement, Construction and Commissioning (EPCC) works for of substations (275KV, 33KV & 11KV), Field Auxiliary Rooms, an Operator Shelter Building and a Local Control Building.
• The contract value is worth RM316mil over the duration of 33 months.
• Earlier last month, WCT won another UIO package civil and infrastructure works at the Petchem Interconnecting and 6,900 Area and Petchem Interconnecting South Area. The contract value is RM267mil (31 months).
• By extension, the total value of both UIO contracts is worth c.RM583mil. Besides these, WCT has another ongoing infrastructure job worth RM342mil that it secured from PETRONAS for the same project.
• With this new contract win, WCT's new contract flows has surged to ~RM2.4bil or roughly 2.4x more than the whole of last year. We have also assumed pre-tax margins of ~7% for this job.
• While WCT has hit a purple patch with its strong resurgence in orderbook top-ups, we remain concerned with the group’s rising cash flow commitments from its property investments.
• Excluding the proposed OUG mall, in-house construction of its property investments for 2Q15 was already worth ~RM585mil. To be sure, WCT’s net gearing stood at 81% as at June 2015.
• Furthermore, the spectre of rising MGS yields makes WCT's prospects of monetising the value of its property investments a tad more challenging moving into 2016.

Source: AmeSecurities Research - 13 Nov 2015