News

Last Friday, WCT announced that they have bagged RM127.4m worth of infrastructure works from Kwasa Land Sdn. Bhd. (Kwasa Land).

The scope of works, i.e. earthworks, sewerage reticulation, sewerage treatment plant and etc is for the site preparation for the development of Kwasa Damansara Township Development in Sungai Buloh which will span over 52 weeks and is expected to be completed by October 2017.

Comments

We are neutral on the contract award of RM127.4m from Kwasa Land as it falls within our expectations. To recap, WCT has secured RM990m worth of construction awards to date that makes up 76% of our FY15E orderbook replenishment assumptions of RM1.3b.

Assuming a conservative pre-tax margin of 10%, this particular project would contribute c.RM4.8m to the bottom line per annum.

Outlook

WCT’s outstanding orderbook remains robust at c.RM2.6b (previously, c.RM2.5b) which will sustain the group for two years.

That said, WCT is still looking to secure more domestic jobs such as from Petronas RAPID works (RM1.0b), TRX (RM800m-900m), KL118 (Warisan Merdeka) (RM2.0b) and also WCE highway (RM600m).

Forecast

Unchanged.

Rating

Maintain OUTPERFORM

Valuation

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

Risks to Our Call

Lower-than-expected new contract flows.

Lower-than-expected construction margins.

Lower-than-expected property sales.

Source: Kenanga Research - 21 Sep 2015