Results

9MFY13 core earnings (adjusted for RM20.2m forex gain and RM5.2m disposal loss) dipped by 2% to RM126.1m (11.8 sen/share), missing estimates by making up 68% and 65% of ours and streets’ forecasts respectively.

Deviations

Expecting strong 4Q results, after a slight breather in 3Q earnings. Hence, we consider earnings to be largely in line.

Dividends

None. Dividends usually declared in the 2Q and 4Q.

Highlights

9MFY13 review… 9M revenue grew by 18% to RM1.39bn underpinned by stronger construction and property development activities. Likewise, operating profit for the construction and property division grew by 26% and 5% to RM121.8m and RM81.5m respectively. Although Reported PATAMI grew 18% to RM141.2m (13.2 sen/share), after adjustment for forex fluctuations and disposal loss, core PATAMI dipped slightly by 2% to RM126.1m (11.8 sen/share). The 9MFY13 performance was dragged down by weak 3Q core PATAMI after posting healthy growth in the 1HFY13.

3QFY13 review… 3QFY13 revenue declined by 5% YoY (QoQ: -13%) to RM269.3m. This was due to lower execution of both construction and property development projects. Construction revenue declined by 2% YoY (QoQ: -15%) to RM269.3m, a contrasting performance when compared to the past 2 quarters whereby the division posted revenue of >RM300m.

Meanwhile, property revenue declined by 6% YoY (QoQ: - 10%) to RM135.2m. We believe that this is due to timing difference as well as declining unbilled property sales which peaked at RM560m in 2QFY12 to RM480m (as of 1HFY13).

Overall, Reported PATAMI grew by 2% YoY but shrank by 27% QoQ to RM41.3m (3.8 sen/share). After adjustment for forex fluctuations, core PATAMI declined by 28% YoY and 16% QoQ to RM38.4m (3.5 sen/share). A muted quarter overall after strong performance in the past two quarters.

Risks

Execution risk; Regulatory and political risk (both domestic and overseas); Rising raw material prices; Unexpected downturn in the construction and property sector; and Failure in securing new sizable construction contracts.

Forecasts

Unchanged. Subject to revision after analyst briefing later today.

Rating

HOLD

Although we favour WCT for its prudent management and growing property and recurring income divisions; major contract wins has been elusive coupled with the potential start-up losses from Gateway@KLIA2 and potential slowdown in the property sector, we are maintaining our HOLD call on WCT.

Valuation

TP maintained at RM2.41 based on unchanged 14x average FY13-14 earnings. Subject to revision after analyst briefing.

Source: Hong Leong Investment Bank Research - 22 Nov 2013