WCT's  9MFY12  net  profit  of  RM119.9m  fell  below  both  our  and  consensus expectations,  at  65.7%  and  66.5%  of  the  estimates  respectively  due  to  continued weakness in its construction division. We are trimming our EPS forecasts by 6.3% for  FY12  and  2.3%  for  FY13  to  account  for  the  slower-than-expected  progress  in its  Qatar  project.  That  said,  we  remain positive on the company's long-term prospects  given  its  sturdy  outstanding  orderbook  of  over  RM3bn.  Maintain  BUY, with our FV lowered to RM3.29, based on an unchanged 12x FY13 PE.

Below  expectations.  WCT's 9MFY12  revenue  came  in  at  RM1.18bn  (+12.0%  y-o-y) due to improved showing from its property development and investment divisions, which grew 65.8% and 51.0% respectively. This helped to offset the marginal 1.9% decline in its construction segment.  Meanwhile, the group's core earnings expanded by a smaller 4.7% y-o-y to RM119.9m owing to lower construction margins. On a quarterly basis, the 3QFY12  numbers  generally  showed  some  decent  improvement  on  a  y-o-y  and  q-o-q comparison  due  to  better  showing  from  its  property  arm,  which  helped  to  offset  the sluggish  performance  of  its  construction  segment  as  revenue  fell  and  margins weakened. 

Revising  forecasts. With  its  construction  division  coming  in  weaker  than  expected  for two  consecutive  quarters,  we  are  taking precautions  and  revisiting  our  model  to incorporate  the  slower  revenue  recognition  of  its  ongoing  project  in  Qatar,  which  we believe experienced some delays. Accordingly, we are trimming our FY12 and FY13 net profit forecasts by 6.3% and 2.3% respectively while leaving our FY14 numbers largely unchanged.

Potential  jobs  flow.  Having  secured  RM2.10bn  worth  of  new  jobs  YTD,  WCT's outstanding construction orderbook currently stands at an estimated RM3.2bn. While we do  not  expect  any  more  job  wins  for  the  remainder  of  the  year,  our  FY13  and  FY14 orderbook  replenishment  targets  are  RM1.5bn  and  RM2.0bn  respectively.  it  is  worth noting  that  the  group  has   tendered    for    some    RM4bn    worth    of    jobs,  comprising  RM1.3bn  worth  of  civil  works  in  Pengerang,   RM1bn in foundation  works  for  the  Tun Razak Exchange, as well as a few hospital projects in Sabah.

BUY. Despite marginally tweaking our earnings estimates, we remain positive on WCT's long-term prospects as the impending opening of KLIA2, scheduled for May 2013, could turn  out  to  be  a  re-rating  catalyst.  Hence,  we  maintain  BUY,  with  our  FV  adjusted  to RM3.29, based on an unchanged 12x FY13 PE.

Source: OSK