News

Yesterday WCT announced that they have bagged another contract worth RM315.6m from PRPC Utilities and Facilities Sdn. Bhd.

The work scope consists of earthworks, environmental protection of the site and the surroundings, piling and foundation works, architectural works, architectural modelling works, building structural works, building services works, health, safety and environmental design and civil works/external works for the Utilities, Interconnecting and Offsite Facilities at the substations, field auxiliary rooms, operator shelter building and local control building, which is expecting to be completed in 33 months time.

Comments

We were surprised by the contract win considering WCT has already exceeded our initial FY15E orderbook replenishment of RM1.3b by 77%, reaching an orderbook replenishment of RM2.3b for the year. To recap, this is WCT’s third contract win since October.

Nonetheless, we are neutral on the contract award as it is still within our FY16E orderbook replenishment of RM1.5b. However, we note that WCT has already achieved 67% of our FY16E target and we might potentially revise our FY16E orderbook replenishments higher in the near future, which would lead to an upgrade in our FY16E earnings.

Assuming a PBT margin of 10%, the contract will contribute c.RM8.6m to our earnings estimate per annum.

Outlook

This contract award further boost WCT’s outstanding orderbook to c.RM4.0b (previously, c.RM3.7b), which is sufficient to sustain the group for another 2- 3 years.

That said, WCT is still looking to secure more domestic jobs, which we believe could be from the WCE highway (RM600m).

Forecast

No changes to our FY15-16E net profits, despite its orderbook replenishment already exceeded our FY15 assumption of RM1.3b by 77% as the excess is to be carried forward to FY16, which is still within our replenishment assumption of RM1.5b.

Rating

Maintain OUTPERFORM

Valuation

Maintaining our current 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 - 13 Nov 2015