Journey to Wealth
WCT Berhad - Here comes the Oman Highway project....
News WCT announced that its 80:20 JV company with Oman Roads Engineering Company LLC has secured a contract from Sultanate of Oman for the construction and completion of Batinah Expressway (Package 2) stretching about 44.8KM with a contract sum of RM1.0b. The project is slated for completion in 36 months.
Comments We view this news as a surprise as we expected any additional contract wins will only come in closer towards end-FY12.
With this new contract award, WCT has already secured approximately RM2.0b worth of contracts YTD, which has exceeded our RM1.0b order book replenishment assumption for 2012. However, we see the contribution to FY12 operating profit to be minimal initially at c.3% due to the 'S' curve trend for construction works and revenue recognition.
The group's current order book stands at RM3.6b (external), which could last it for the next 3 years.
Outlook We believe that there will be more local projects to be awarded closer to end-2012, i.e. Petronas RAPID and TRX earthworks with a combine contract value at c.RM2.5b. We have factored in a RM1.0b order book replenishment in our FY13 forecast.
2013 will be an exciting year for WCT riding on its sizeable outstanding order book of RM3.6b (external) and the additional recurring income from its upcoming Gateway@KLIA2 by 2Q13.
Forecast We have revised our FY13 earnings higher by 9% as we expect the contribution from Oman Highway will only materially impact its earnings from FY13 onwards.
Rating Maintain OUTPERFORM
We are maintaining our OUTPERFORM recommendation for WCT due to the attractive upside (+60%) from the current price.
Valuation There is no material revision in our Target Price of RM3.93, which is based on SOP valuation.
Risks Further delays in ETP based projects.
Source: Kenanga
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