News

• Wins road contract. WCT announced that it has been awarded a RM211.5m road contract from DBKL. The job involves the construction of an elevated access road from Jln Maarof to Jln Semantan along the SPRINT Highway and rectifying the road entrance to Pusat Bandar Damansara. The contract duration is for 30 months.

Comments

• Orderbook scales new highs. With this contract in the bag, WCT’s YTD job wins now stand at RM1.9bn. This is close to management’s full year guidance of RM2bn. We estimate its orderbook to now stand at a new high of RM5.9bn, translating to a cover of 4x on FY16 construction revenue.

• What’s in the pipeline? In the near term, WCT is hopeful to secure a building job within the TRX area. For FY18, management guides for an orderbook replenishment of RM2bn on back of existing tenders of RM5bn. Potential jobs include the ECRL, Pan Borneo Sabah and developments from sister-cos Malton and Pavilion Group (RM1.5bn).

Risks

• Derailment of its de-gearing plans.

Forecasts

• Although YTD job wins of RM1.9bn has exceeded our full year assumption of RM1.6bn, we leave our forecast unchanged as we take a conservative stance.

Rating

Maintain BUY, TP: RM2.29

• Albeit with a cautious stance, we are turning positive on WCT given its results recovery and de-gearing plans that has been laid out by its new top management.

Valuation

• Our unchanged SOP based TP of RM2.29 implies FY17-18 P/E of 22.4x and 20.1x respectively.

• While the implied P/E valuations at our TP appear steep, one must bear in mind that WCT has a significant surplus land value (i.e. market value less BV), backing 77% of its market capitalisation.

Source: Hong Leong Investment Bank Research - 11 Dec 2017