• WCT’s 9M16 core net profit of RM73.9m came in below our expectation, making up 64% of FY16 net profit.

• Net gearing increased to 0.9x

• We retain our forecasts and recommendation pending management guidance and analyst briefing to be held later today

• HOLD rating with an unchanged TP of RM1.68. Quarterly numbers fell but improved on yearly basis.

WCT’s 3Q16 core earnings declined by 7.8% to RM20.1m qoq. This is in line with lower revenue recognition during the quarter by 28.7%. Nevertheless, its 9M16 core earnings saw an improvement of 160.9% to RM73.9m in tandem with higher revenue of 29.2%. However, it still missed ours’ and consensus forecast, coming in at 64% and 56% of FY16 forecasts respectively.

Nine months numbers were driven by higher construction recognition. We note that the increase in core net profit was on account of improved revenue from local construction, derived particularly from building projects namely My TOWN Shopping Centre and Putrajaya Commercial Office. This segment recorded a revenue and EBIT of RM1.2bn (+44.5%) and RM43.3m (+17.3%) in 9M16 respectively.

Gearing up to 0.9x. WCT’s net gearing increased to 0.9x during the period. However, with the recent disposal of The Ascent office block to EPF for RM347m will bring back the gearing to 0.8x – based on our estimates. We do expect further value unlocking over the medium term in spite of drastic change in major shareholder.

Maintain HOLD. We make no changes to our forecasts pending further guidance from the management and analyst briefing later today. We maintain HOLD for WCT Holdings with an unchanged TP of RM1.68.

Source: BIMB Securities Research - 22 Nov 2016