News

Yesterday, WCT announced that they have been awarded a contract worth RM267.0m by PRPC Utilities and Facilities Sdn. Bhd.

The work scope consists of earth works, concrete works, storm water drainage system, roads & paving, miscellaneous works, underground piping, earthing networks, procurement, temporary works and utilities for the Utilities, Interconnecting and Offsite (UIO) Facilities at Petchem Interconnecting 6900 Area and South Area, which is expected to be completed in 31 months.

Comments

We are positive with this contract which is the second contract bagged in the month of October. To recap, WCT managed to replenish RM2.0b worth of orderbook exceeding our FY15 assumptions of RM1.3b by 53%. However, it is still within our FY16E replenishment assumption of RM1.5b.

Assuming a pre-tax margin of 10%, this particular project will contribute c.RM7.7m per annum to its bottomline.

Outlook

This contract award further boost WCT’s outstanding orderbook to c.RM3.7b (previously, c.RM3.4b) which is sufficient to sustain the group for two years.

That said, WCT is still looking to secure more domestic jobs from KL118 (Warisan Merdeka) (RM2.0b) and also WCE highway (RM600m).

Forecast

No changes to our FY15-16E net profits, despite its orderbook replenishment already exceeded our FY15 assumptions of RM1.3b by 53%, as the excess are to be felt in FY16E which is still within our replenishment assumption of RM1.5b.

Rating

Maintain OUTPERFORM

Valuation

Maintaining our current SoP-based TP of RM1.81 per share (@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 - 28 Oct 2015