Period  1Q14

Actual vs. Expectations The 1Q14 net profit of RM46.1m came in within expectations, making up 21% and 23% of our fullyear forecast and market estimates, respectively.

Dividends  No dividend was declared in 1Q14.

Key Results Highlights

 QoQ, 1Q14 core net profit recovered strongly to RM46.1m from RM2.3m within a quarter due to the prior low base. In a previous quarter, WCT had made provisions for its construction division following margins markdown in expectations of cost overruns. Construction EBIT margin recovered back to double-digit, at 10% in 1Q14 from 3% in 4Q13 on the back of external orderbook of RM2.0b.

 YoY, both 1Q14 revenue and net profit declined by 23% and 47%, respectively, due to poor performance in both construction and property development divisions.

Outlook  So far in FY14, WCT has yet to secure any new contracts against our FY14 assumption of RM1.5b. While we like the fact that WCT still has about RM1.7b external outstanding orderbook that will last for the next 2-3 years, we are wary that WCT might not deliver what we have expected due to the absence of new contract for almost 6 months in FY14.

 On a positive note, WCT is now eyeing a few key projects in Malaysia (i.e. WCE (which main contract has already been awarded), RAPID infra works, Kwasa Damansara Land civil works, and Putrajaya building works) and in the Gulf States, i.e. Qatar infra works.

Change to Forecasts     Maintained for now pending more information from analyst briefing today.

Rating Maintain MARKET PERFORM

 We are maintaining our MARKET PERFORM rating due to WCT’s lacks of fresh catalysts.

Valuation  We revised lower our TP to RM2.32 from RM2.50 after: (i) we roll over our valuation parameter to

FY15, (ii) lower PER of 13x from 15x on construction division in our SOP following the lack of job flows.

Risks  Lower-than-expected orderbook replenishment

 Slower-than-expected construction progress

 Slower-than-expected property sales.

 Higher-than-expected input costs.

Source: Kenanga