Period

2Q15/1H15

Actual vs. Expectations

1H15 core net profit of RM64.3m accounts for 43% and 46% of our and consensus full-year estimates, respectively. We deem the 1H15 results are broadly inline, as we expect construction progress for its on-going projects to pick up pace in 2H15.

Dividends

Interim dividend of 2.18 sen declared, within expectations.

Key Results Highlights

YoY, 1H15 core net profit declined by 23% to RM64.3m underpinned by weaker revenue (- 11%) and a higher effective tax rate of 28% visà- vis 22% back in 1H14. The decline in revenue was mainly due to lower revenue contribution from its property division (-37%) and also overseas project.

QoQ, 2Q15 revenue was up by 20% to RM422.3m driven by its construction division (+34%) as the construction works for its on-going projects picked up pace. However, core net profit was down by 6% to RM31.1m, driven by higher expenses and lower operating margin of 11% (- 18ppt) from its property development division, coupled with a higher effective tax rate of 34%.

Outlook

WCT’s outstanding orderbook remains healthy at c.RM2.3b that will last the group for the next three years.

That said, WCT is still looking to secure more domestic jobs such as Petronas RAPID works (RM1.0b), TRX (RM200m), KL118 (Warisan Merdeka) (RM2.0b) and WCE highway.

Change to Forecasts

Unchanged.

Rating

Maintain OUTPERFORM

Valuation

Maintain SoP-based TP of RM1.81 (20% discount). Our TP implies fwd-PER of 13.4x in line with its 5-year historical average fwd-PER.

Risks to Our Call

Lower-than-expected new contracts flows

Lower-than-expected construction margins

Lower-than-expected property sales

Source: Kenanga Research - 21 Aug 2015