Journey to Wealth
WCT - 2Q12 results broadly in line
Period 2Q12/1H12
Actual vs. Expectations
The 2Q12 results came in within our expectations but slightly below that of the consensus. 1H12 net profit of RM80m made up 45% and 42% of ours and the consensus' full year FY12 forecasts of RM174m and RM187m respectively.
Dividends A single tier interim dividend of 3.75 sen was announced as expected.
Key Result Highlights
The 1H12 net profit increased to RM80m (+6%) due to higher contribution from its property development and investment division. However, its construction operating profit was lower by 8% due to the lower revenue recognition for some of the key projects that are already at their tail-ends such as NDIA. The newly secured projects in FY12 (collectively at RM1b) are expected to contribute positively from 2H12 onwards.
QoQ, net profit was marginally lower by 1% on the back of a 16% jump in revenue. This was due to lower margin recognised for the construction division and a higher operating cost for its property investment division. To recap, Paradigm Mall was launched in May 2012. We believe that the rise in cost here was partly due to the start-up cost for Paradigm Mall. We expect the cost to normalise in 2H12.
YoY, the revenue and net profit increased by 6% and 5% respectively. This was mainly supported by the higher revenue contribution from its property development and investment of 120% and 51% respectively.
Outlook We expect WCT to secure more projects in the near term i.e. the TRX (Tun Razak Exchange) earthworks and the Oman Highway project (collectively worth c RM2b).
Its current order book now stands at RM3.5b, which will last it for the next 2 to 3 years.
Forecasts No changes in our FY12 and FY13 forecast.
Rating Maintain OUTPEFORM
We are maintaining our OUTPERFORM recommendation due to the 58% potential upside to our Target Price.
Valuation We are keeping our target price unchanged at RM3.93 based on SOP valuation.
Risks Delays in contract award i.e. ETP based projects.
Source: Kenanga
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