News

WCT has secured a RM341.9m contract from PETRONAS Refinery and Petrochemical Corporation Sdn Bhd for the provision of Package 20C1: Common Construction Access and Permanent Roads within the RAPID Site at Pengerang, Johor. The contract duration is 24-36 months.

Highlights

First win of the year… We view this as a good win for WCT as the RM341.9m contract value represents 20.5% of FY13’s construction revenue and 34.2% of its local order book replenishment target of RM1.0bn. This marks its first win of the year.

2.5 sen/share… Assuming a 8% PAT margin, this project will translate to ~2.5 sen/share (FD: ~1.9 sen/share) for WCT.

Earnings visibility… Overall, WCT’s outstanding order book has been lifted from RM2.8bn to RM3.2bn (see Figure #1), translating to 2.7x FY13’s construction revenue and 1.3x order book-to-market cap ratio.

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 as the contract win is already part of our RM1.0bn order book replenishment assumption for FY14.

Rating

HOLD

Positives: (1) Major contract wins; (2) Growing property investment income; (3) Strategic land banking exercise; (4) Listing of property division.

Negatives: (1) Failure to secure new sizable projects; (2) Slower than expected take up rate for property launches.

Valuation

Maintain TP at RM2.26 based on unchanged 14x average FY14-15 earnings.

Source: Hong Leong Investment Bank Research - 23 Jul 2014