Period  3Q13/9M13

Actual vs. Expectations WCT’s 9M13 core net profit of RM131.2m came in within our but below consensus expectations, making up 73% and 67% of our and market estimates, respectively.

Dividends  No dividend declared in the 3Q13.

Key Results Highlights QoQ, 3Q13 revenue declined by 13% to RM418.5m due to lower revenue in construction division following slow progress billings in Malaysia and the Middle East. Due to weak topline performance which dragged down the bottomline, core net profit declined by 11%. This is despite the fact that EBIT and PBT margins expanded by 4ppts and 1 ppts respectively.

 YoY, similarly, 3Q13 revenue and core net profit fell by 5% and 23%, respectively, due to weaker performance of its construction division.

 However, 9M13 revenue and net profit increased by 18% and 2%, YoY, thanks to higher property revenue recognition.

Outlook  To date, WCT has secured contracts worth RM484m. We have imputed new contracts assumption of RM600m, hence shortage of RM116m which we believe could be materialized before yearend by securing building jobs. As for FY14, we have imputed RM1.5b new orders.

 Going forward, we believe WCT is poised to win at least one or two jobs in the near to medium-term namely roads and bridges projects in Qatar, the remaining packages of TRX (Zone 1 and 2) and hospital construction projects in Sabah.

Change to Forecasts No changes to our forecasts as the results came in within our expectation.

Rating Maintain MARKET PERFORM

 We are maintaining our MARKET PERFORM rating as the stock lacks re-rating catalysts for now.

 Nonetheless, the stock will be re-rated if: (i) it achieves a higher-than-expected new contract wins (such as Qatar road and bridge projects, Putrajaya Building Parcel F, and Sabah Hospitals), (ii) higherthan-expected property sales, (iii) the Nad Al Sheba Racecourse arbitration outcome is in WCT’s favour, and (iv) the cancelled RM1.0b Oman Highway is revived and awarded to WCT.

Valuation  We are maintaining our Target Price of RM2.50 based on SOP-derived valuation.

Risks to Our Call Delays in construction projects.

 Rising building material costs.

Source: Kenanga