Results

• WCT reported 4QFY14 results with revenue of RM322m (+23% YoY, -32% QoQ) and core PATMI (after removing RM10m in revaluation gains) of RM10m (YoY: core loss of RM5m in 4QFY13, QoQ: -60%).

• For the full year ended FY14, core PATMI amounted to RM111m, declined 32% YoY. This missed our forecast by 22% and consensus by 25%.

Deviation

• The disappointment stemmed from a weaker than expected 4Q which saw revenue decline by 32% QoQ. Segmentally, construction revenue fell 28% and property by 52% QoQ.

Dividends

• A final dividend was declared which comprised: (i) 1 sen cash DPS and (ii) distribution of treasury shares on a basis of 1 for every 100 shares held.

Highlights

• Thinning orderbook. WCT’s orderbook currently stands at RM2bn, implying a cover of only 1.6x on FY14 construction revenue which makes its earnings visibility look rather murky. This thinning orderbook balance resulted from new job wins coming in below its “burn rate” for 2 consecutive years. While job wins stood at RM994m and RM670m for FY13-14, this was below the burn rate of around RM1.2bn.

• Tenders may not reflect replenishment outlook. While WCT may have tendered for a whopping RM24bn worth of projects (RM23bn domestic and RM1bn overseas), we believe the bulk of this sum is concentrated on the PDP role for the Penang Transport Master Plan. We believe that such a concentrated tender book is unreflective on its orderbook replenishment potential, which in recent times, has been rather pedestal.

• Property sales slump. FY14 property sales ended at RM461m, a 31% decline YoY. On a brighter note, unbilled sales are at RM657m, which provides a decent cover of 1.7x FY14 property revenue. WCT is gunning for RM650m worth of sales in FY15, a tall order, in our view.

Risks

• Stiff competition for jobs that it is bidding for and slow property sales.

Forecasts

• We cut FY15-16 by 13% and 22% as we impute lower property revenue as a result of slower than expected sales.

Rating

HOLD, TP: RM1.64

• While WCT’s results were a let-down and its outlook remains challenging, its saving grace comes from the value of its investment properties.

Valuation

• Apart from our earnings cut, we also widen our SOP discount from 10% to 20% to reflect its challenging outlook.
• Our SOP based TP is reduced from RM2.04 to RM1.64, implying FY14-15 P/E of 12.3x and 13.2x respectively.

Source: Hong Leong Investment Bank Research - 26 Feb 2015