WCT announced its airport expansion contract win worth RM440m in Kota Bahru. Latest contract win falls within our RM1bn job replenishment assumption for FY21. This job win was previously signalled by GoM and well guided by management. WCT is well positioned to undertake the job given its track record. WCT’s latest orderbook amounts to RM5.5bn translating to a 4.3x cover. Going forward, WCT intends to participate more aggressively in Sabah. Maintain forecasts. Maintain HOLD with unchanged TP of RM0.61 based on 20% SOP discount. While WCT is poised to recover gradually along with declining cases, we reckon valuations are fair trading at FY21-22 P/E multiple of 16.0x/15.1x.

NEWSBREAK

First sizable win. WCT announced its first sizable contract win of the year receiving the LoA issued by Ministry of Transport Malaysia worth RM440.4m. The contract is in relation to extension and upgrading of Sultan Ismail Petra Airport, Kota Bahru, Kelantan as a main contractor commencing in April 2021 spanning 36 months. Scope of works for WCT include building works, landside infrastructure works, airside infrastructure works. Completion of the expansion would increase airport’s capacity to 4m passengers annually from 1.5m at present.

HLIB’S VIEW

Within expectations. Job win falls within our expectations as GoM has previously publicly signalled its intention to award WCT the job and was also highlighted during last week’s briefing. The job will see WCT leveraging on its past airport experience, having undertaken works at KLIA, klia2 and New Doha International Airport. In terms of margins, generally management guides for EBIT margin between 5-8%. This job brings WCT’s YTD contract wins to RM577m, on pace for our RM1bn assumption in FY21. Recall that in early 2021, WCT secured a RM137m contract for hotel/office works at TRX.

Orderbook. With the latest win, WCT’s latest outstanding orderbook swells to RM5.5bn (+9%) translating into 4.3x cover based on FY20 construction revenue. Looking ahead, remaining job wins would be supported by its RM10bn worth of tenders submitted/pending submission (RM4bn from building works). On the infra side, near term opportunities centres largely in Sabah, PBH Sabah in particular.

Forecast. Maintain forecasts as job win falls within expectations.

Maintain HOLD, TP: RM0.61. Maintain HOLD with unchanged TP of RM0.61. TP is derived based on a 20% discount to SOP value of RM0.76. Our TP implies FY21/22 P/E of 16.4x/15.5x. While WCT is poised to recover gradually along with declining cases, we reckon valuations are fair trading at FY21-22 P/E multiple of 16.0x/15.1x.

Source: Hong Leong Investment Bank Research - 24 Mar 2021