• HLIB has a BUY rating on WCT with an institutional target price of RM2.12, or 27% upside. We like WCT due to its huge orderbook at RM3.8bn (3.3x cover on FY15 construction revenue) and a decent unbilled property sales of RM529m (1.6x cover on FY15 property revenue) coupled with its ongoing de-gearing exercise (i.e. monetization of the Ascent and Paradigm Service Apartments to raise RM500m and REIT-ing its investment properties with estimated net proceeds of RM720m), targeting to reduce net gearing to 40% from 81% currently.

• Management maintains its bullish FY16 RM2bn orderbook replenishment target (vs HLIB RM1bn) So far, WCT has bid for two building jobs collectively worth RM1.5bn. It has also tendered for the MRT2 package from Bandar Malaysia to Kg Muhibbah (V204) and prequalified for the LRT3. In Qatar, WCT is in the midst of preparing tenders for several highways. For its property division, management maintains its FY16 RM600m sales target (vs HLIB RM350m) as it vying for more jobs from key property development projects (TRX and Kwasa Land).

• Poised for further upside amid bullish downtrend line breakout. At RM1.67, WCT’s valuations are inexpens ive agains t its peers (FIG2). We believe bullis h sector prospects and undemanding valuations would provide sufficient margin of safety to cushion any sharp fall in share price.

• We opine that the downtrend resistance breakout yesterday on rising volume could signal more upside ahead amid bottoming up indicators. Share prices are likely to advance further towards RM1.76 (52-week high) and RM1.89 (138.2% FR) in the near term , before reaching our long term target at RM1.93 (200-w SMA and 150% FR). Major supports are RM1. (61.8% FR) and RM1.58 (50% FR). Cut loss at RM1.56.

Source: Hong Leong Investment Bank Research - 6 Oct 2016