Period  4Q13/FY13

Actual vs. Expectations FY13 core net profit of RM187.5m came in within our expectation but below consensus’, at 103% and 94%, respectively.

Dividends  Final single tier 3.25 sen dividend was declared. Cumulatively, WCT has declared 6.75 sen dividend, which translates into 3.1% yield.

Key Results Highlights QoQ, despite 4Q13 revenue declining by 33% to RM280.4m, 4Q13 core net profit was higher by 36% thanks to stronger contribution from the local construction division. There are about RM2.0b worth of orders currently being undertaken by WCT with big local projects such as N-S Expressway Lane widening, Putrajaya Building, and Medical Centre in Sabah.

 YoY, 4Q13 core net improved significantly by 79% due to low-base effect. Last year’s revenue recognition was lower due to initial construction stage of projects.

 YTD, FY13 revenue and net profit grew by 7% and 17% respectively, thanks to higher revenue recognition in construction division.

Outlook  Although WCT did not secure at least RM1.0b new contracts last year, we still like the fact of WCT has about RM3.0b in orderbook which will provide them earnings visibility for the next 3-4 years.

 Going forward, WCT is likely to win a few jobs in the Middle-East and locally. These jobs are expected to be announced in the medium-term which includes roads and bridges in Qatar, WCE expressway, and the remaining packages of TRX (Zone 1 and 2).

Change to Forecasts While we are maintaining our FY14 numbers, we introduced FY15 net profit forecasts of RM266.2m, translating into 23% net profit growth.

Rating Maintain MARKET PERFORM   

We are maintaining our MARKET PERFORM rating as we are still waiting for re-rating catalysts. Amongst them are; (i) a higher-than-expected new contract wins (ii) higher-than-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 back to WCT.

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

Risks  Delays in construction projects.

 Rising building material costs.

Source: Kenanga