• Construction division to drive earnings higher. WCT’s orderbook s tands at a record RM4.1bn, translating to a healthy cover ratio of 3.2x on FY15 construction revenue and could last for another 2 to 3 years. This follows from superior job wins of RM3.1bn last year, an all-time high. Despite the sizeable order book in hand, WCT is not resting on its laurels and the group is gunning for RM2bn in new job wins . Over the near term , it is eyeing on an infra package for Kwas a D’s ara (RM300m) which should be out anytime soon.
• Via a JV with KKB Engineering, WCT is also one of the 17 prequalified consortiums for the 10 packages of the Sarawak Pan Borneo (RM16bn). Apart from that, WCT is targeting for (i) external infra works at TRX, (ii) smaller RAPID packages and (iii) highway jobs such as WCE, DASH and SUKE. It has also been prequalified for the LRT3 (RM9bn), MRT2 (RM28bn) and KL118 infra works.
• De-gearing exercises in 2016. WCT is undergoing de-gearing exercises, which include i) disposal of its 50% stake in development of 608 acres of land in Serendah to UEM-Sunrise, and to jointly develop the land; ii) listing of its construction arm; and iii) REITing its shopping malls. These exercises are expected to reduce the group’s net gearing to 0.4x.
• Poised for a symmetrical triangle breakout. Having corrected 40.6% from 52- week high of RM1.87 to a low of R M1.11 (26 Aug 2015), WCT’s s hare prices staged a steady recovery to close at RM1.60 yesterday. As prices are holding up decisively well above all key 30-d/50-d/100-d/200-d SMAs and uptrend line (as well as supported by gradual uptick in technical indicators), we believe WCT will experience an immediate symmetrical triangle breakout soon.
• A decisive breakout above downtrend line near RM1.65 will spur prices higher towards RM1.72 and our long term objective at RM1.87. Key supports are RM1.55 (29 Feb low) and RM1.51 (100-d SMA). Cut loss at RM1.49.
• Attractive risk to reward ratio with 16.9% upside against 6.9% downside. All in, we see an attractive risk to reward ratio for investor with a theoretical entry price of RM1.60 given that the downside to the cut loss zone of RM1.49 is 11 sen (-6.9%) while the upside to the LT price objective of RM1.87 is 27 sen (+16.9%).

Source: Hong Leong Investment Bank Research - 3 Mar 2016