Results

FY13 core earnings (adjusted for RM27.7m forex gain, RM5.2m disposal loss and RM52m revaluation gain) slumped by 26% to RM123.0m (11.5 sen/share), missing estimates by making up 67% and 64% of ours and streets’ forecasts respectively.

Deviations

Due to unexpected provisions in the construction division and slower than expected property billings in the final quarter.

Dividends

Net dividend of 3.25 sen/share declared. Hence, bringing full year dividends to 6.75 sen/share (2Q: 3.5 sen), exceeding our dividend estimates of 5.7 sen/share and translating to ~60% core payout ratio. Payment date to be determined during AGM.

Highlights

4Q review… In what was supposedly a seasonally strong quarter, revenue fell by 26% YoY and 33% QoQ to RM280.4m The decline was mainly due to slower construction and property billings whereby the latter posted quarterly revenue of only RM32.9m, as opposed to expectations of more than RM100m.

Provisions were made in the construction division in anticipation of higher costing going forward. Hence, construction operating margins fell to 3% from 12% in the previous quarter while property operating profit declined largely in line with revenue. Overall, 4Q core earnings (after adjusting for RM7.48m forex gain and RM52m revaluation gain) swung to losses of RM3.1m (0.3 sen/share).

FY13 review… Despite the weak 4Q performance, revenue grew by 7% to RM1.67bn, lifted mainly by construction revenue which grew by 15% to RM1.17bn and mitigated the impact of a 4% property revenue decline to RM442.5m. Overall, full year earnings were weighed down by 4Q’s poor showing whereby FY13 core earnings (adjusted for RM27.7m forex gain, RM5.2m disposal loss and RM52m revaluation gain) slumped by 26% to RM123.0m (11.5 sen/share).

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

Under review, subject to revision post analyst briefing.

Rating

HOLD

We are taken aback by the temporary setback in 4Q results. Although WCT’s fundamentals remain intact, major contract wins has been elusive. Coupled with the potential start-up losses from Gateway@KLIA2 and slowdown in the property sector, we are maintaining our HOLD call on WCT due to the lack of upside catalysts.

Valuation

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

Source: Hong Leong Investment Bank Research - 26 Feb 2014